|                                  
|----------------------------------
|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, 2008
|                                                        |                                                                                                                                    
|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)       

|                                                                                 
|---------------------------------------------------------------------------------
|32
 Avenue Karamanli                                                             
|P.O.
 Box 70837                                                                  
|16605
 Voula                                                                     
|Athens,
 Greece                                                                  
|(Address
 of principal executive offices)                                        
|                                                                                 
|Dr.
 Loukas Barmparis                                                            
|President                                                                        
|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 |  | New York
 Stock Exchange                  
|Preferred
 stock purchase rights          |  | 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, 2008, there were 54,501,334 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
 filero | Non-accelerated
 filerx

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


|         |  |                                                                                                          |  |   |  |       
|-------- |  | -------------------------------------------------------------------------------------------------------- |  | - |  | ------
|US GAAPx |  | International
 Financial Reporting Standards as issued by
 the
 International Accounting Standards Board |  | o |  | Othero

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). Yes ̈Nox

---



TABLE OF CONTENTS

|                              |  |                                                                               |  |     
|----------------------------- |  | ----------------------------------------------------------------------------- |  | ----
|                              |  |                                                                               |  | Page
|                              |  |                                                                              
|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                                                    |  | 21  
|ITEM 4A.                      |  | UNRESOLVED STAFF COMMENTS                                                     |  | 36  
|ITEM 5.                       |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                  |  | 36  
|ITEM 6.                       |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    |  | 54  
|ITEM 7.                       |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                             |  | 59  
|ITEM 8.                       |  | FINANCIAL INFORMATION                                                         |  | 65  
|ITEM 9.                       |  | THE OFFER AND LISTING                                                         |  | 66  
|ITEM 10.                      |  | ADDITIONAL INFORMATION                                                        |  | 66  
|ITEM 11.                      |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                    |  | 80  
|ITEM 12.                      |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                        |  | 80  
|                              |  |                                                                               |  |     
|PART II                       |  |                                                                               |  | 81  
|                              |  |                                                                               |  |     
|ITEM 13.                      |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                               |  | 81  
|ITEM 14.                      |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
 PROCEEDS |  | 81  
|ITEM 15.                      |  | CONTROLS AND PROCEDURES                                                       |  | 81  
|ITEM 16A.                     |  | AUDIT COMMITTEE FINANCIAL EXPERT                                              |  | 82  
|ITEM 16B.                     |  | CODE OF ETHICS                                                                |  | 82  
|ITEM 16C.                     |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                        |  | 82  
|ITEM 16D.                     |  | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                    |  | 83  
|ITEM 16E.                     |  | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
 PURCHASERS       |  | 83  
|ITEM 16F.                     |  | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT                                  |  | 83  
|ITEM 16G.                     |  | CORPORATE GOVERNANCE                                                          |  | 83  
|                              |  |                                                                               |  |     
|PART III                      |  |                                                                               |  | 85  
|                              |  |                                                                               |  |     
|ITEM 17.                      |  | FINANCIAL STATEMENTS                                                          |  | 85  
|ITEM 18.                      |  | FINANCIAL STATEMENTS                                                          |  | 85  
|ITEM 19.                      |  | EXHIBITS                                                                      |  | 85  
|                              |  |                                                                              
|INDEX TO FINANCIAL STATEMENTS |  | F-1                                                                          

---



FORWARD-LOOKING STATEMENTS

All
statements in this annual report that are not statements of historical fact are
forward-looking statements. 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 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 crew, length and number of off-hire days, drydocking requirements 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 and obtain additional financing in the
 future to fund capital expenditures, acquisitions and other corporate
 activities;
| |   |                                                                                                                                                                                                                                                
| |  | 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 to our advantage our Managers relationships and reputation
 within the drybulk shipping industry;                                                                                                                    
| |   |                                                                                                                                                                                                                                                
| |  | 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 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

ii

---



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.

iii

---



|                 |                                                      
|---------------- | -----------------------------------------------------
|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 INFORMATION                                      

A. Selected Financial Data

The
following table presents selected combined and consolidated financial and other
data of Safe Bulkers, Inc. for each of the four years in the four year period
ended December 31, 2008. We have not included our financial data for the
year ended December 31, 2004 due to the unreasonable effort and expense of
preparing such information. 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 combined and consolidated statements of income, stockholders equity
and cash flows for the years ended December 31, 2006, 2007 and 2008, and
the consolidated balance sheets at December 31, 2007 and 2008, together
with the notes thereto, are included in Item 18. Financial Statements and
should be read in their entirety.

|                                                                 |  |                                                    |            |      |   |            |   |      |            |   |   |            |  
|---------------------------------------------------------------- |  | -------------------------------------------------- | ---------- | ---- | - | ---------- | - | ---- | ---------- | - | - | ---------- | -
|                                                                 |  | Year Ended December 31,                            |           
|                                                                 |  |                                                    |           
|                                                                 |  | 2005                                               |            | 2006 |   | 2007       |   | 2008 |           
|                                                                 |  |                                                    |            |      |   |            |   |      |           
|                                                                 |  | (In
 thousands of U.S. dollars
 except share data) |           
|                                                                 |  |                                                    |            |      |   |            |   |      |           
|STATEMENT
 OF INCOME                                             |  |                                                    |            |      |   |            |   |      |            |   |   |            |  
|Revenues                                                         |  | $                                                  | 82,877     |      | $ | 99,040     |   | $    | 172,057    |   | $ | 208,411    |  
|Commissions                                                      |  |                                                    | (3,211     | )    |   | (3,731     | ) |      | (6,209     | ) |   | (7,639     | )
|                                                                 |  |                                                    |            |      |   |            |   |      |            |   |   |            |  
|Net revenues                                                     |  |                                                    | 79,666     |      |   | 95,309     |   |      | 165,848    |   |   | 200,772    |  
|                                                                 |  |                                                    |            |      |   |            |   |      |            |   |   |            |  
|Voyage expenses                                                  |  |                                                    | (228       | )    |   | (420       | ) |      | (179       | ) |   | (273       | )
|Vessel operating expenses                                        |  |                                                    | (10,366    | )    |   | (13,068    | ) |      | (12,429    | ) |   | (17,615    | )
|Depreciation                                                     |  |                                                    | (7,610     | )    |   | (9,553     | ) |      | (9,583     | ) |   | (10,614    | )
|General and administrative expenses                             |  |                                                    |            |      |   |            |   |      |            |   |   |            |  
|Management fee to related party                                  |  |                                                    | (803       | )    |   | (1,006     | ) |      | (1,177     | ) |   | (4,420     | )
|Third party expenses                                             |  |                                                    |           |      |   |           |   |      | (2,477     | ) |   | (3,625     | )
|Early redelivery cost                                            |  |                                                    |           |      |   | (150       | ) |      | (21,438    | ) |   | (565       | )
|Gain on sale of assets                                           |  |                                                    | 26,785     |      |   | 37,015     |   |      | 112,360    |   |   |           |  
|                                                                 |  |                                                    |            |      |   |            |   |      |            |   |   |            |  
|Operating income                                                 |  |                                                    | 87,444     |      |   | 108,127    |   |      | 230,925    |   |   | 163,660    |  
|                                                                 |  |                                                    |            |      |   |            |   |      |            |   |   |            |  
|Interest expense                                                 |  |                                                    | (3,668     | )    |   | (6,140     | ) |      | (8,225     | ) |   | (16,392    | )
|Other finance costs                                              |  |                                                    | (124       | )    |   | (116       | ) |      | (161       | ) |   | (408       | )
|Interest income                                                  |  |                                                    | 692        |      |   | 775        |   |      | 1,290      |   |   | 1,492      |  
|Loss on derivatives                                              |  |                                                    | (3,171     | )    |   | (1,963     | ) |      | (704       | ) |   | (19,509    | )
|Foreign currency gain/(loss)                                     |  |                                                    | 13,477     |      |   | (3,279     | ) |      | (13,759    | ) |   | (9,501     | )
|Amortization and write-off of deferred finance charges           |  |                                                    | (63        | )    |   | (180       | ) |      | (166       | ) |   | (131       | )
|                                                                 |  |                                                    |            |      |   |            |   |      |            |   |   |            |  
|Net income                                                       |  | $                                                  | 94,587     |      | $ | 97,224     |   | $    | 209,200    |   | $ | 119,211    |  
|                                                                 |  |                                                    |            |      |   |            |   |      |            |   |   |            |  
|Earnings per share, basic and diluted                            |  | $                                                  | 1.74       |      | $ | 1.78       |   | $    | 3.84       |   | $ | 2.19       |  
|Cash dividends declared per share                                |  |                                                    |           |      |   |           |   | $    | 7.04       |   | $ | 3.83       |  
|Weighted average number of shares outstanding, basic and
diluted |  |                                                    | 54,500,000 |      |   | 54,500,000 |   |      | 54,500,000 |   |   | 54,500,889 |  
|                                                                 |  |                                                    |            |      |   |            |   |      |            |   |   |            |  
|                                                                 |  |                                                    |            |      |   |            |   |      |            |   |   |            |  

1

---



|                                                     |  |                                                    |         |      |   |         |   |      |          |   |   |          |  
|---------------------------------------------------- |  | -------------------------------------------------- | ------- | ---- | - | ------- | - | ---- | -------- | - | - | -------- | -
|                                                     |  | Year Ended December 31,                            |        
|                                                     |  |                                                    |        
|                                                     |  | 2005                                               |         | 2006 |   | 2007    |   | 2008 |         
|                                                     |  |                                                    |         |      |   |         |   |      |         
|                                                     |  | (In
 thousands of U.S. dollars
 except share data) |        
|OTHER FINANCIAL DATA                                 |  |                                                    |         |      |   |         |   |      |          |   |   |          |  
|Net cash (used in)/provided by operating activities  |  | $                                                  | (22,349 | )    | $ | (12,806 | ) | $    | 278,506  |   | $ | 259,597  |  
|Net cash (used in)/provided by investing activities  |  |                                                    | (6,065  | )    |   | (33,835 | ) |      | 88,416   |   |   | (148,223 | )
|Net cash provided by/(used in) financing activities  |  |                                                    | 28,414  |      |   | 46,641  |   |      | (366,922 | ) |   | (83,672  | )
|Net increase/(decrease) in cash and cash equivalents |  |                                                    |        |      |   |        |   |      |         |   |   | 27,702   |  

|                                                    |  |                    |         |      |   |         |  |      |         |  |   |         |  
|--------------------------------------------------- |  | ------------------ | ------- | ---- | - | ------- |  | ---- | ------- |  | - | ------- | -
|                                                    |  | As of December 31, |        
|                                                    |  |                    |        
|                                                    |  | 2005               |         | 2006 |   | 2007    |  | 2008 |        
|                                                    |  |                    |         |      |   |         |  |      |        
|BALANCE SHEET DATA                                  |  |                    |         |      |   |         |  |      |         |  |   |         |  
|Total current assets                                |  | $                  | 159,538 |      | $ | 282,021 |  | $    | 98,883  |  | $ | 88,086  |  
|Total fixed assets                                  |  |                    | 232,655 |      |   | 253,448 |  |      | 308,340 |  |   | 387,296 |  
|Other non-current assets                            |  |                    | 405     |      |   | 314     |  |      | 434     |  |   | 6,900   |  
|Total assets                                        |  |                    | 392,598 |      |   | 535,783 |  |      | 407,657 |  |   | 482,282 |  
|Total current liabilities                           |  |                    | 111,271 |      |   | 172,275 |  |      | 43,984  |  |   | 70,863  |  
|Derivative liabilities                              |  |                    |        |      |   |        |  |      | 242     |  |   | 21,716  |  
|Long-term debt, net of
 current portion             |  |                    | 149,500 |      |   | 134,457 |  |      | 306,267 |  |   | 413,483 |  
|Time charter discount                               |  |                    |        |      |   |        |  |      | 2,766   |  |   |        |  
|Unearned revenue-Long-term                          |  |                    |        |      |   |        |  |      |        |  |   | 11,765  |  
|Total owners/shareholders
 equity/(deficit)       |  |                    | 131,827 |      |   | 229,051 |  |      | 54,398  |  |   | (35,545 | )
|Total liabilities and owners/shareholders
 equity |  |                    | 392,598 |      |   | 535,783 |  |      | 407,657 |  |   | 482,282 |  

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
recently decreased substantially; 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
industry 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 have reached near historically low levels as of late 2008.
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 nine
of our 13 drybulk vessels in service as of May 15, 2009 were deployed on
period time charters of more than one year, if the current low charter rates in
the drybulk market continue to 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 agreements. In addition, we are currently scheduled to
receive five newbuilds at various times beginning in the third quarter of 2009
and through 2010, three of which do not currently have charters. We cannot
assure you that we will be able to successfully charter our

2

---



vessels in the
future or renew existing charters at rates sufficient to allow us to meet our
obligations or pay any dividends.

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 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 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 economic
downturn, especially in the Asian region, 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 and Japan. As a result, a negative change in economic
conditions in any Asian country, particularly China, Japan and, 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 recent 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. However, the recent rapid contraction in the world economy and
the expectation of declining growth or economic decline in China and India in
2009 means that we may continue to experience decreases in such drybulk trade
and demand. Through the end of the third quarter of 2008, Chinas gross
domestic product was approximately 2.3% lower than it was during the same period
in 2007, and it is likely that China and other countries in the Asia Pacific
region will continue to experience slowed or even negative economic growth in
the near future. Moreover, a deepening global recession marked by a continuing
slowdown in the United States and Japanese economies or economies of the

3

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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.

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 is near historic highs. As of December 2008, newbuild
orders had been placed for an aggregate of more than 72% of the existing global
drybulk fleet, with deliveries expected mainly during the next 36 months. An
over-supply of drybulk vessel capacity, particularly during a period of
economic recession, 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, 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. 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 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.

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. Various jurisdictions are
also considering the regulation of 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,
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.

4

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These
requirements can also affect the resale prices or useful lives of our vessels,
require reductions in cargo capacity, ship modifications or operational changes
or restrictions, 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. However, there can be no assurance that
such certification will be maintained indefinitely. If we fail to maintain ISM
Code certification for our vessels, we may also breach covenants in certain of
our credit 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 facilities. This would negatively
impact our revenues.

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 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 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 Indian Ocean off the coast of Somalia
and Kenya. 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 Gulf of Aden 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

5

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spills and
other environmental damage. Although our vessels carry a relatively small
amount of 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 can give no
assurance that we are adequately insured against all risks or that our insurers
will pay a particular claim. With respect to war risks insurance, which we
usually obtain for certain of our vessels making port calls in designated war
zone areas, we can give no assurance that such insurance will 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. Loss of hire insurance covers the loss
of revenue during extended vessel off-hire periods, such as those that occur
during an unscheduled drydocking due to damage to the vessel from accidents.
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.

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. In
addition, the loss of any of our vessels could harm our reputation as a safe
and reliable vessel owner and operator.

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

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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, or OECD, 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. Although
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.

Rising 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 the fuel (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.

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

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. You should expect the market value of our vessels to fluctuate 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 believe
that we were in breach of certain covenants relating to the maintenance of
minimum security vessel values under certain credit facilities as of
December 31, 2008. However, we subsequently entered into agreements with
the relevant lenders, providing for certain confirmations, waivers and
amendments relating to the affected credit facilities eliminating the effects
of these defaults and confirming that certain actions did not give rise to a
default. In connection with obtaining these confirmations, waivers and
amendments, we have agreed with one of our lenders to prepay certain amounts on
various dates between April 20 and July 17, 2009. We estimate that
these prepayments will total approximately $35.9 million, which we have already
deposited with the lender. In the future, if the market value of our vessels or
newbuilds declines further, we may breach some of the covenants contained in
these and other credit 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. In addition, if we write down the
carrying value of a vessel or incur a loss on sale it would adversely affect
our results of operations and cash flow.

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.

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. We intend to enter into
period time charters only with reputable charterers, but we cannot assure you
that our charterers will not default on or seek to renegotiate the terms of the
charters. 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. After a charterer defaults 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.

We cannot assure you
that our board of directors will declare dividends.

The
declaration and payment of dividends, if any, will always be subject to the
discretion of our board of directors and the requirements of Marshall Islands
law. The timing and amount of any dividends declared will depend on, among
other things: (a) our earnings, financial condition and cash requirements and
availability, (b) our ability to obtain debt and equity financing on acceptable
terms as contemplated by our growth strategy, (c) provisions of

8

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Marshall
Islands law governing the payment of dividends, (d) restrictive covenants in
our existing and future debt instruments and (e) global financial conditions.

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 credit facilities and in any future debt program;                                                          
| |   |                                                                                                                                 
| |  | prevailing
 global and regional economic and political conditions; and                                                          
| |   |                                                                                                                                 
| |  | 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                                                         
| |   |                                                                                                                                 
| |  | restrictions
 under Marshall Islands 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 vessels in addition
to our contracted newbuilds through a combination of our operating cash flow,
and debt financing through our subsidiaries or equity financing. If financing
is not available to us on acceptable terms, our board of directors may
determine to finance or refinance 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: (a) an event of default has occurred and is continuing or
would occur as a result of the payment of such dividend or (b) during the
twelve month period ending March 31, 2010, one of our charters is cancelled,
any of its terms are waived or the payments under such charter decrease, unless
we are able to demonstrate to the lenders satisfaction that we have the
necessary cash resources to meet our newbuild commitments, and maintain a
minimum cash balance of $25.0 million. We expect that any future credit
facilities will also have restrictions on the payment of dividends.

Marshall
Islands laws and 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 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.

9

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We can give no
assurance that dividends will be paid in the future.

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 2008, approximately 72.4% of our revenues were derived from three
charterers.

We could lose
a customer for many different reasons, including if:

| |   |                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the customer
 fails to make charter payments because of its financial inability,
 disagreements with us or otherwise;                                                                                                             
| |   |                                                                                                                                                                                                                                   
| |  | the customer
 terminates its charters because of our non-performance, including where there
 are 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. 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 or
through selective acquisitions of other vessels in addition to our contracted
newbuilds. Our future growth will primarily depend on our ability to locate and
acquire suitable newbuild and other vessels, enlarge our customer base, operate
and supervise any newbuilds we may order, and obtain required debt or equity
financing on acceptable terms.

A delay in the
delivery to us of any of these vessels, including our newbuilds, 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.

10

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In addition,
we may seek to negotiate a termination of a newbuild contract due to market
conditions, financing limitations or other reasons. In these circumstances, our
ability to terminate a newbuild contract is dependent on negotiating acceptable
terms with the relevant shipyard or seller, which may require us to forego
prior deposits we have made and to pay additional cancellation fees. In
addition, where we have already arranged a future charter with respect to the
cancelled newbuild, we would need to negotiate with the charterer to provide an
acceptable substitute vessel, to avoid being in breach of 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 such as the present where charter
rates are low, we are exposed to the risk that we will be unable to secure
financing for newbuild vessels, or secure charters at prices that will
adequately support the acquisition costs of those newbuild vessels. As a
result, we cannot give any assurance that we will be successful in executing
our growth plans or that we will not incur 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. We cannot assure you that our Manager
will 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
May 15, 2009, the vessels in our current fleet had an average age of
3.4 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, through our
subsidiaries, 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 remaining
balance of the contract prices for our contracted newbuilds is $307.9 million
as of May 15, 2009, including certain additional amounts for adjustments,
as provided under our newbuild contracts, such as certain third party seller
interest expenses. We intend to fund these commitments with available cash from
operations, and new additional credit facilities entered into by the relevant
vessel-acquiring subsidiaries. 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, through our subsidiaries, are unable to enter into our 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

11

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commitments
for capital expenditures relating to our contracted newbuilds, which would have
a material adverse effect on our business, financial condition and results of
operations.

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 May 15, 2009, the average age of the vessels in
our current fleet was 3.4 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. We cannot assure you that, as our vessels age, market conditions will
justify those expenditures or enable us to operate our vessels profitably
during the remainder of their useful lives.

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 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 2008, we incurred
approximately 24.7% of our vessel operating expenses in currencies other than
the U.S. dollar. Although as of March 31, 2009, none of our indebtedness
or the amounts due under our newbuild contracts was denominated in other
currencies, 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 difference in 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
U.S. dollar denominated results of operations and financial condition 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 most of 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 dividend;                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | permit us to
 pay dividends if, during the twelve month period ending March 31, 2010, one
 of our charters is cancelled, any of its terms are waived or the payments
 under such charter decrease, unless we are able to demonstrate to the
 lenders satisfaction that we have the necessary cash resources to meet our
 newbuild commitments and maintain a minimum cash balance of $25.0 million;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | 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;                                                                                                                                                                                                                                                                                                                                                                      

12

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| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | 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;                                                       
| |   |                                                                                                       
| |  | permit the
 Hajioannou family to reduce its shareholding in us below 51%; 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
 necessary, providing cash collateral security in an amount necessary for the
 outstanding amounts to meet this threshold;
| |   |                                                                                                                                                                                                                                                                                                                                                                   
| |  | maintain a
 cash collateral deposit of $2,000,000 with the respective lender;                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                   
| |  | maintain a
 minimum balance of $150,000 on a per vessel basis in the respective vessel
 operating account; 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%;                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                
| |  | 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 $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 to the extent it exceeds book
 value as set out in the relevant guarantee;

13

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| |   |                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------
| |  | we must maintain
 minimum free liquidity of $500,000 on deposit with the relevant lender on a
 per vessel basis; and
| |   |                                                                                                                     
| |  | we can pay
 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.

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.

We are a
holding company and our subsidiaries, which are all wholly-owned by us either
directly or indirectly, 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 and its affiliates provide us with our
executive officers and provide us 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 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               
| |   |                                                                                           
| |  | 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.

14

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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.

In addition,
we have agreed, under our management agreement, to allow our Manager to provide
certain management services to an unaffiliated company that is engaged in the
business of chartering in vessels owned by other vessel owners for subsequent
chartering out to third party customers, with respect to three vessels.
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 because of its management of these three vessels.

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

Management fees are
payable to our Manager regardless of our profitability.

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
1.0% on gross freight, charter hire, ballast bonus and demurrage. In addition,
we pay our manager certain commissions and fees with respect to vessel
purchases 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 are fixed until the second anniversary of our management agreement, and
thereafter, will be adjusted every year 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. If our profitability decreases, we may be contractually obligated to
pay management fees 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.

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, an investor in us 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. This relationship 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 Polys Hajioannou, Vorini Holdings Inc., Machairiotissa
Holdings Inc., or any entity controlled by or under common control with Polys
Hajioannou, Vorini Holdings Inc., and/or Machairiotissa Holdings Inc. (together,
the Hajioannou Entities), in the future, any of the Hajioannou Entities could
acquire and operate such drybulk vessels under the management of our Manager in
competition with us. Also, although we have a similar right of first refusal
with respect to acquisitions by Nicolas Hadjioannou, our former chief operating
officer, this right and the related restrictions on any competitive activities
conducted by him expire in February 2010, which would allow him to compete with
us after that time. 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 results
of operations.

15

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Our business depends
upon certain employees who may not necessarily continue to work for us.

Our future
success depends, to a significant extent, upon our chief executive officer,
Polys Hajioannou, and certain other members of our senior management and that
of our Manager. Polys Hajioannou has substantial experience in the drybulk
shipping industry and for 21 years has worked with us and our Manager and its
predecessor. He and others employed by us and our Manager are crucial to the
execution of our business strategies and to the growth and development of our
business. If these 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 arrangements with our chief executive officer and
former chief operating officer restricting their ability to compete with us,
like restrictive covenants generally, may not be enforceable.

Our chief
executive officer, Polys Hajioannou, and our former chief operating officer,
Nicolaos Hadjioannou, have entered into restrictive covenant agreements with us
under which they are precluded during the term of their services with us as
executives and directors and for one year thereafter (and, in the case of our
chief executive officer, 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 or controlling any business that owns or
operates such vessels. Nicolaos Hadjioannou resigned from his position as our
chief operating officer on February 17, 2009, and therefore, after
February 17, 2010, there will be no competitive restrictions on his
business activities. Courts generally do not favor the enforcement of such
restrictions, particularly when they involve individuals and could be construed
as infringing on their 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, 2008,
vessels in our fleet have made 18 calls to ports in Iran out of a total of 941
calls on worldwide ports. One of our vessels, Pedhoulas Leader, also made
one port call to Iran from July 7, 2007 to July 8, 2007 for the sole purpose of
bunkering (refueling). 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.

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

16

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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 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.

Risks Relating to Our Common Stock

Vorini Holdings, 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, which is controlled by our chief executive officer, Polys Hajioannou,
and our former chief operating officer, Nicolaos Hadjioannou, owns
approximately 81.64% 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,
in the future 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.

The requirements of
being a public company will increase our costs.

As a public
company, we are subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, and the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act. These requirements may place a burden on our systems and
resources. The Securities Exchange Act of 1934, as amended, requires that we
file annual reports with respect to our business and financial condition. The
Sarbanes-Oxley Act, among other things, requires that we maintain effective
disclosure controls and procedures and internal controls for financial
reporting. In order

17

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to maintain
and improve the effectiveness of our disclosure controls and procedures and internal
control over financial reporting, significant resources and management
oversight are required. This may divert managements attention from other
business concerns, which could have a material adverse effect on our business,
financial condition and results of operations.

In addition,
if we fail to maintain effective controls and procedures, we may be unable to
provide the financial information that publicly traded companies are required
to provide in a timely and reliable fashion. Any such delays or deficiencies
could limit our ability to obtain financing, either in the public capital
markets or from private sources, and could thereby impede our ability to
implement our growth strategies. In addition, any such delays or deficiencies
could result in failure to meet the requirements for continued listing of our
common stock on the New York Stock Exchange, which would adversely affect
the liquidity of our common stock.

Under
Section 404 of the Sarbanes-Oxley Act of 2002, we will be required to
include in each of our future annual reports on Form 20-F a report containing
our managements assessment of the effectiveness of our internal control over
financial reporting and a related attestation of our independent auditors. This
requirement for an attestation of our independent auditors will first apply to
us with respect to our annual report on Form 20-F for the fiscal year ending
December 31, 2009. We are currently undertaking a comprehensive effort in
preparation for compliance with Section 404. This effort will include the
documentation, testing and review of our internal controls under the direction
of our management. We cannot be certain at this time that all our controls will
be considered effective. Therefore, we can give no assurances that our internal
control over financial reporting will satisfy the new regulatory requirements
when they become applicable to us.

Future sales of our
common stock could cause the market price of our common stock to decline.

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.

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. Although
we and our executive officers, directors and Vorini Holdings Inc., our
principal stockholder, entered into agreements with the underwriters of our
initial public offering which placed restrictions on selling and engaging in
certain other transactions relating to our securities, these restrictions
expired on November 24, 2008.

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 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.

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.

18

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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 United
States source 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, our gross U.S. source shipping income (that is, income attributable to
shipping transportation that begins and/or ends in the United States) will be
subject to a 4% U.S. income tax (without allowance for deductions). Our U.S.
source shipping 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

19

---



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.

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, because there is no direct
legal authority under the PFIC rules addressing our current and projected
future operations. Moreover, 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 (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 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. Accordingly, 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, particularly in light of the aforementioned case,
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Tax ConsiderationsE. United States
Federal Income Tax ConsiderationsTaxation of United States 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Tax ConsiderationsE. United States Federal Income Tax
ConsiderationsTaxation of United States 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

20

---



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.

|        |                           
|------- | --------------------------
|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 our
affiliated management company, Safety Management Overseas S.A., which we refer
to as Safety Management or our Manager.

Over the past
13 years, under the leadership of Polys Hajioannou, we through our subsidiaries
have renewed our fleet by selling ten drybulk vessels during periods of what we
viewed as favorable secondhand market conditions and contracting to acquire 29
drybulk newbuilds. This includes, for the three years to December 31, 2008,
the sale of six drybulk vessels and acquisition of seven drybulk vessels (refer
to Item 5. Operating and Financial Review and ProspectsA. Operating
ResultsResults of Operations for more information). 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 1,061,900 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 30 drybulk vessels. A
number of our Managers key management and operational personnel have been
continuously employed with Safety Management and its predecessor companies 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. We maintain our principal executive offices at 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 May 15, 2009, we had a fleet of 13
Japanese-built drybulk vessels, with an aggregate carrying capacity of
1,061,900 dwt and an average age of 3.4 years, making us one of the worlds
youngest fleets of Panamax, Kamsarmax and Post-Panamax class vessels. Our fleet
is expected to grow through 2010 as the result of the delivery of five further
contracted newbuilds, comprised of three Post-Panamax and two Capesize class
vessels. Upon delivery of the last of our contracted newbuilds, our fleet will
be comprised of 18 vessels, having an aggregate carrying capacity of 1,692,900
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

21

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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
May 15, 2009 our fleet comprised 13 vessels, of which five are Panamax,
three are Kamsarmax and five are Post-Panamax class vessels, with an aggregate
carrying capacity of 1,061,900 dwt and an average age of 3.4 years.
Assuming delivery of the last of our contracted newbuilds in 2010, our fleet
will be comprised of five Panamax, three Kamsarmax, eight Post-Panamax and two
Capesize class vessels, and the aggregate carrying capacity of our 18 vessels
will be 1,692,900 dwt. As of May 15, 2009, the average remaining duration
of the charters for our existing fleet was 3.1 years.

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 May 15, 2009.

|                                                         |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|-------------------------------------------------------- |  | ------ |  | ---------------- |  | -------------- |  | ------------- |  | ----------------- | ----------------------------------- | ---------------- | ---------- | ------------------------ |  | ----------------------------------------------------------------------------------------- |  | - | 
|Vessel Name
 (Subsidiary
 Owner)                         |  | Dwt    |  | Year
 Built
 (1) |  | Country
 Built |  | Charter
 Type |  | Charter
 Rate (2) |                                     | Commissions
 (3) |            | Time Charter Period
 (4) |  | Sister
 Ship (5)                                                                          | 
|                                                         |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           | 
|                                                         |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|C u r r e n t  F l e e t                                 |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|                                                         |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|P a n
 a m a x                                           |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|                                                         |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|                                                         |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|Efrossini(Efragel
 Shipping Corporation (Efragel))     |  | 76,000 |  | 2003             |  | Japan          |  | spot          |  | $                 | 16,750                              |                  | 5.0        | %                        |  | Apr. 2009  Jun. 2009
 (11)                                                               |  | A | 
|                                                         |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|Maria(Marindou Shipping Corporation
 (Marindou))       |  | 76,000 |  | 2003             |  | Japan          |  | Time          |  | $                 | 46,000                              |                  | 1.25       | %                        |  | Feb. 2009  Jun. 2009
 (10)                                                               |  | A | 
|                                                         |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|Vassos(Avstes Shipping Corporation
 (Avstes))          |  | 76,000 |  | 2004             |  | Japan          |  | Time          |  | $                 | 29,000                              |                  | 1.25       | %                        |  | Nov. 2008  Oct. 2013                                                                     |  | A | 
|                                                         |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|Katerina(Kerasies Shipping Corporation
 (Kerasies))    |  | 76,000 |  | 2004             |  | Japan          |  | Time          |  | $                 | 73,000                              |                  | 1.25       | %                        |  | Jan. 2009  Jun. 2009
 (10)                                                               |  | A | 
|                                                         |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|Maritsa(Marathassa Shipping Corporation
 (Marathassa)) |  | 76,000 |  | 2005             |  | Japan          |  | Time          |  | $
 $              | 15,500
 28,000                      | (6)              | 4.75
 1.25 | %%                       |  | Jan. 2009  Dec. 2009
 Jan.2010  Jan. 2015                                               |  | A | 
|                                                         |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|                                                         |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|K a m s a r m a x                                        |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|                                                         |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|Pedhoulas Merchant(Pemer Shipping Ltd.
(Pemer))        |  | 82,300 |  | 2006             |  | Japan          |  | Time          |  | $                 | 43,120                              |                  | 1.25       | %                        |  | Jan. 2009  Nov. 2010                                                                     |  | B | 
|                                                         |  |        |  |                  |  |                |  |               |  |                   |                                     |                  |            |                          |  |                                                                                           |  |   | 
|PedhoulasTrader
 (Petra Shipping Ltd. (Petra))         |  | 82,300 |  | 2006             |  | Japan          |  | Time          |  | $
 $
 $
 $        | 69,000-
 56,500- 
 42,000-
 20,000- |                  | 1.00       | %                        |  | Aug. 2008  Jul. 2009
 Aug. 2009  Jul. 2010
 Aug. 2010  Jul. 2011Aug. 2011  Jul.
 2013 |  | B | 

22

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|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|----------------------------------------------------------------- |  | --------- |  | ---------------- |  | -------------- |  | ------------- |  | ----------------- | ------------------------------------------------------------ | ---------------- | ---------------- | ------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- | 
|Vessel Name
 (Subsidiary
 Owner)                                  |  | Dwt       |  | Year
 Built
 (1) |  | Country
 Built |  | Charter
 Type |  | Charter
 Rate (2) |                                                              | Commissions
 (3) |                  | Time Charter Period
 (4) |  | Sister
 Ship (5)                                                                                                                                            | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             | 
|Pedhoulas Leader(Pelea Shipping Ltd.
(Pelea))                   |  | 82,300    |  | 2007             |  | Japan          |  | Time          |  | $                 | 36,750                                                       |                  | 3.75             | %                        |  | Dec. 2007  Jun. 2009
 (10)                                                                                                                                 |  | B     | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|P o s t  P a
 n a m a x                                          |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|Stalo(Staloudi Shipping Corporation
 (Staloudi)) (7)            |  | 87,000    |  | 2006             |  | Japan          |  | Time          |  | $
 $              | 48,500
 34,160                                               |                  | 5.0
 1.25        | %%                       |  | Jul. 2007  Aug. 2009Jan. 2010  Dec. 2014                                                                                                                  |  | C     | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|Marina(Marinouki Shipping Corporation
 (Marinouki)) (7)         |  | 87,000    |  | 2006             |  | Japan          |  | Time          |  | $
 $
 $$
 $
 $
 $ | 61,500-
 57,500-
 52,500-
 42,500-
 32,500-
 31,500 
 21,500 |                  | 2.50             | %                        |  | Dec. 2008  Mar 2009
 Apr. 2009  Dec. 2009
 Dec. 2009  Dec. 2010Dec. 2010  Dec.
 2011Dec. 2011  Oct.
 2012Oct. 2012  Dec.
 2012
 Dec. 2012  Dec. 2013 |  | C     | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|Sophia(Soffive Shipping Corporation
 (Soffive)) (7)             |  | 87,000    |  | 2007             |  | Japan          |  | Time          |  | $                 | 34,720                                                       |                  | 1.25             | %                        |  | Oct. 2008  Sep. 2013                                                                                                                                       |  | C     | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|Eleni(Eniaprohi Shipping Corporation
(Eniaprohi))
 (7)          |  | 87,000    |  | 2008             |  | Japan          |  | Time          |  | $
 $
 $           | 70,000
 66,400
 34,160                                       |                  | 1.25
 1.25
 1.25 | %%%                      |  | Nov. 2008  Oct. 2009
 Oct. 2009  Mar. 2010
 Apr. 2010  Mar. 2015                                                                                         |  | C     | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|Martine(Eniadefhi Shipping Corporation
 (Eniadefhi)) (7)        |  | 87,000    |  | 2009             |  | Japan          |  | Time          |  | $                 | 40,500                                                       |                  | 1.25             | %                        |  | Feb. 2009  Feb. 2014                                                                                                                                       |  | C     | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|Subtotal                                                          |  | 1,061,900 |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|N
 e w b u i l d s(9)                                             |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|P o s t  P a
 n a m a x                                          |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|Hull No. 1039
 (Maxdodeka Shipping Corporation (Maxdodeka))     |  | 92,000    |  | 2009             |  | South Korea    |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  | D (8) | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|Hull No. 1050
 (Maxdekatria Shipping Corporation (Maxdekatria)) |  | 92,000    |  | 2010             |  | South Korea    |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  | D (8) | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 
|Hull No. 1579
 (Shikoku Friendship Shipping Company (Shikoku))  |  | 95,000    |  | 2010             |  | Japan          |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  | D (8) | 
|                                                                  |  |           |  |                  |  |                |  |               |  |                   |                                                              |                  |                  |                          |  |                                                                                                                                                             |  |       | 

23

---



|                                                              |  |           |  |                  |  |                |  |               |  |                   |        |                  |      |                          |  |                     |  |   | 
|------------------------------------------------------------- |  | --------- |  | ---------------- |  | -------------- |  | ------------- |  | ----------------- | ------ | ---------------- | ---- | ------------------------ |  | ------------------- |  | - | 
|Vessel Name
 (Subsidiary
 Owner)                              |  | Dwt       |  | Year
 Built
 (1) |  | Country
 Built |  | Charter
 Type |  | Charter
 Rate (2) |        | Commissions
 (3) |      | Time Charter Period
 (4) |  | Sister
 Ship (5)    | 
|                                                              |  |           |  |                  |  |                |  |               |  |                   |        |                  |      |                          |  |                     | 
|                                                              |  |           |  |                  |  |                |  |               |  |                   |        |                  |      |                          |  |                     |  |   | 
|C a p e s i z e                                               |  |           |  |                  |  |                |  |               |  |                   |        |                  |      |                          |  |                     |  |   | 
|                                                              |  |           |  |                  |  |                |  |               |  |                   |        |                  |      |                          |  |                     |  |   | 
|                                                              |  |           |  |                  |  |                |  |               |  |                   |        |                  |      |                          |  |                     |  |   | 
|Hull No. 1074 (Eptaprohi
 Shipping Corporation (Eptaprohi)) |  | 176,000   |  | 2010             |  | China          |  | Time          |  | $                 | 40,000 |                  | 1.0  | %                        |  | Jun. 2010-May 2020  |  | E | 
|                                                              |  |           |  |                  |  |                |  |               |  |                   |        |                  |      |                          |  |                     |  |   | 
|Hull No. 1075
 (Maxpente Shipping Corporation (Maxpente))   |  | 176,000   |  | 2010             |  | China          |  | Time          |  | $                 | 25,928 |                  | 2.50 | %                        |  | Aug. 2011-Apr. 2031 |  | E | 
|                                                              |  |           |  |                  |  |                |  |               |  |                   |        |                  |      |                          |  |                     |  |   | 
|                                                              |  |           |  |                  |  |                |  |               |  |                   |        |                  |      |                          |  |                     |  |   | 
|                                                              |  |           |  |                  |  |                |  |               |  |                   |        |                  |      |                          |  |                     |  |   | 
|Subtotal                                                      |  | 631,000   |  |                  |  |                |  |               |  |                   |        |                  |      |                          |  |                     |  |   | 
|                                                              |  |           |  |                  |  |                |  |               |  |                   |        |                  |      |                          |  |                     |  |   | 
|                                                              |  |           |  |                  |  |                |  |               |  |                   |        |                  |      |                          |  |                     |  |   | 
|TOTAL                                                         |  | 1,692,900 |  |                  |  |                |  |               |  |                   |        |                  |      |                          |  |                     |  |   | 

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(1)  | For
 newbuilds, the dates shown reflect the expected delivery dates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(2)  | Quoted
 charter rates are gross charter rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(3)  | Commissions
 reflect payments made to third party brokers or our charterers, and do not
 include the 1.0% 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 May 15, 2009, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(6)  | Average
 charter rate quoted among various options which could alternatively be
 exercised.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(7)  | Double-hulled
 vessel.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(8)  | These
 Post-Panamax class newbuilds are being built in different shipyards than our
 current Post-Panamax class vessels, but may be subject to similar operational
 treatment as the current vessels of the same class because they have
 substantially the same specifications as the current vessels. Under certain
 of our charter contracts, we are able to substitute these newbuilds for the
 current vessels nominated under the charter contract, although in certain
 cases, such substitution may result in a discount in the charter rate.                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(9)  | Our
 subsidiaries Maxdeka Shipping Corporation (Maxdeka) and Maxenteka Shipping
 Corporation (Maxenteka), have agreed with the relevant seller to cancel
 their respective contracted newbuilds, and accordingly these newbuilds are
 not included in the table. These newbuilds did not have any contracted
 charterparty agreements. Refer to Note 24(e) to our financial statements
 included at the end of this annual report for more details concerning these
 arrangements.                                                                                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(10) | Under
 agreements we have entered into with the charterers of our vessels Maria,
 Katerina,
 and Pedhoulas
 Leader, we have agreed to the termination of existing charters for
 these vessels upon their redelivery between June 15 and July 15,
 2009. In exchange for the early redelivery of these vessels, we will be
 compensated in the aggregate amount of $38.6 to $41.9 million, depending on
 the actual redelivery date of each vessel. The compensation was calculated
 based on the difference between the contracted charter rates and the agreed
assumed average market rates over the charter duration, with an agreed discount.
Following redelivery the vessels will be available
for employment, although we are yet to arrange replacement charters
(refer to Note 24(c) of our financial statements included at the
end of this annual report).
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(11) | Under an agreement we have entered into with the charterer of
our vessel Efrossini, we have agreed to the termination of the existing
charter as of March 15, 2009. In exchange for the early redelivery of this vessel, we                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

24

---



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | received
 from the charterer compensation in the aggregate amount of $25.5 million, net
 of commissions. The compensation was calculated based on the difference
 between the contracted charter rates and the agreed assumed average market
 rates over the charter duration, with an agreed discount. The vessel is
 currently employed in the spot market (refer to Note 24(c) to our financial
 statements included at the end of this annual report).

Since the
beginning of 1995 through December 31, 2008, we have acquired and taken
delivery of 22 newbuilds. We are currently contracted to take delivery of
a further five newbuilds, comprised of two South Korean-built Post-Panamax
class vessels, with contract prices of $73.5 million per vessel, scheduled
for delivery in 2009 and 2010 respectively, one Japanese-built Post-Panamax
class vessel, with a contract price of $68.4 million, scheduled for
delivery in 2010 and two Chinese-built Capesize class vessels, with contract
prices of $80.0 million and $81.0 million, respectively, both scheduled for
delivery in 2010. In addition to payment of the contract prices for the
newbuilds, we are required to make payments for certain adjustments under our
newbuild contracts, such as certain third-party seller interest expenses.

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, Intermare Transport G.m.b.H., Eastern Energy
Pte. Ltd., NYK, Shinwa Kaiun Kaisha, Kawasaki Kisen Kaisha, Ltd, or their
affiliates. During 2008, three of our charterers accounted for 72.4% of our
revenues, namely Daiichi, Bunge and NYK, with each one accounting for more than
10% of total revenues. During 2007, three of our charterers accounted for 69.2%
of our total revenues, namely Daiichi, Bunge and Cargill, with each one
accounting for more than 10% of total revenues. During 2006, two of our
charterers accounted for 75.2% of our revenues, namely Bunge and Cargill, 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.

Management of Our
Fleet

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 arrangements with
our Manager and its performance are reviewed by our board of directors. We have
a management agreement pursuant to which our

25

---



Manager
provides us and our subsidiaries with technical, administrative, commercial and
certain other services for an initial term expiring on June 3, 2010, with
automatic one-year renewals for an additional eight years, unless we provide
notice of non-renewal 12 months prior to the end of the then-current term. Our
Manager reports to us and our board of directors through our executive
officers.

In addition,
we have agreed to allow our Manager to provide certain management services to
an unaffiliated third party with respect to three vessels, until
February 2010.

Historically,
our Manager only rarely managed vessels other than those in our fleet and
currently it does not manage any other companies vessels, with the exception
of certain services provided with respect to three vessels to an unaffiliated
third party, which is engaged in the business of chartering-in third party
vessels owned by other vessel owners for subsequent chartering-out to third
party customers. 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 the Hajioannou Entities, which include
Polys Hajioannou, Nicolaos Hadjioannou, Vorini Holdings and Machairiotissa
Holdings, and drybulk vessel businesses that are acquired, invested in or
controlled by the Hajioannou Entities, subject in each case to compliance with,
or waivers of, the restrictive covenant agreements entered into between us and
the Hajioannou Entities.

Our Manager
has 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 arranged by our Manager, our drybulk vessel will
receive such charter. In return for providing technical, administrative and
commercial management of our vessels, including human resources, financial and
other administrative services such as bookkeeping, audits and accounting
services, banking and financial services, client and investor relations
services and office space, our Manager receives a management fee of $575 per
day per vessel. After expiry of the initial term of the agreement on
June 3, 2010, these fees will be adjusted every year by agreement between
us and our Manager. In return for chartering services rendered to us, our
Manager also receives a fee of 1.0% 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.

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. Having all of our current fleet and, upon delivery of our
contracted newbuilds, a majority of our expected fleet at that time built in
Japanese shipyards, 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

We have four
shore-based employees, all of whom are provided by our Manager. This management
team consists of our chief executive officer, president, chief financial
officer and chief operating officer. 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, 2008, 252 people
served on board the vessels in our fleet, and our Manager employed 38 people,
all of whom were shore-based.

26

---



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.

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 and business interruption due to political
circumstances in foreign countries, hostilities and labor strikes as well as
personal injury 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 young age of our
fleet, we are generally able to procure relatively low hull and machinery
insurance rates.

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 able to be obtained at reasonable rates.

Hull and machinery and war risks 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 risk up to an agreed amount per vessel. Our war risks insurance
covers risks of partial loss or actual or constructive total loss from
confiscation, seizure, capture, vandalism, sabotage and other war-related
risks. 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 due to
under-insurance.

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 Clubs, 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 and crew liabilities in connection
with our shipping activities. This includes third-party liability, crew
liability and other related expenses resulting from the injury or death of crew
members, passengers and other third parties, the loss or damage to cargo,
third-party 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. Unless
otherwise provided by the

27

---



international
conventions that limit the liability of vessel owners and subject to the
capping discussed below, our coverage, except for pollution, will be
unlimited.

Our current
protection and indemnity insurance coverage for pollution is limited to $1.0
billion per vessel per incident. We are a member of a P&I Club that is a
member of the International Group of P&I Clubs (the International Group).
The P&I Clubs that comprise the International Group insure approximately
90% of the worlds commercial blue-water tonnage and have entered into a
pooling agreement to reinsure each individual P&I Clubs liabilities. The
International Group exists to arrange collective insurance and reinsurance for
P&I Clubs, to represent the views of vessel owners and charterers who
belong to those P&I Clubs on matters of concern to the shipping industry and
to provide a forum for the exchange of information. Each of the constituent
P&I Clubs is an independent, non-profit making mutual insurance
association, providing cover for its vessel owners and charterer members
against liabilities of their respective businesses. Each P&I Club is
controlled by its members through a board of directors elected from the
membership. The board of directors retains responsibility for strategic and
policy issues, but delegates the technical running of the P&I Club to
full-time managers.

Although the
P&I Clubs compete with each other for business, they have found it
beneficial to pool their larger risks under the auspices of the International
Group. This pooling is regulated by a contractual agreement which defines the
risks that are to be pooled and exactly how these are to be shared among the
participating P&I Clubs. The pool provides a mechanism for sharing all
claims in excess of $7.0 million up to a limit of about $4.5 billion. For a
layer of claims between $50.0 million and $2.0 billion the P&I Clubs in the
International Group purchase reinsurance from the commercial market. The
pooling system provides participating P&I Clubs with reinsurance
protection, at cost, at much higher levels than would normally be available in
the commercial reinsurance market. As a member of a P&I Club that is a
member of the International Group, we are subject to periodic assessments
payable to the P&I Clubs mainly based on our claims record, as well as the
claims record of the International Group, all other members of the individual
P&I Clubs and members of the pool of P&I Clubs comprising the
International Group.

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 its hull and machinery,
 including the electrical plant, 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 surveys 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

28

---



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.

Most vessels
are also drydocked every 24 to 36 months for inspection of their underwater
parts and for repairs related to inspections. 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.
If In Water Survey (IWS) 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 up to the tenth anniversary of
vessel delivery, subject to certain conditions, thereby generally achieving a
higher utilization for the relevant vessel.

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 of our recent drydockings and special surveys, and 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)
|                    |  |                |  |                   
|Efrossini           |  | August 2010    |  | February 2013     
|Maria               |  | October 2010   |  | April 2013        
|Vassos              |  | August 2011    |  | February 2014     
|Katerina            |  | November 2011  |  | May 2014          
|Maritsa             |  | September 2009 |  | January
 2010     
|Pedhoulas
 Merchant |  | March
 2010    |  | March
 2011       
|Pedhoulas
 Trader   |  | May
 2010      |  | May
 2011         
|Pedhoulas
 Leader   |  | February
 2011 |  | March
 2012       
|Stalo               |  | January
 2010  |  | January
 2011     
|Marina              |  | January
 2010  |  | January
 2011     
|Sophia              |  | June 2011      |  | June 2012         
|Eleni               |  | November 2012  |  | November 2013     
|Martine             |  | February 2013  |  | February 2014     

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.

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

29

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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
our management agreement with our Manager terminates, we would attempt to hire
another party to assume this responsibility, including compliance with the
regulations described herein. In such event 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 temporarily suspend 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 the
nature of our young, modern fleet is such that 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 fuel oil and allows for special areas to be established 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.
For example, the United States in February 2007 proposed a series of amendments
to Annex VI regarding emissions of particulate matter, nitrogen oxides and
sulfur oxides. At its 58th session in October 2008, the IMO Marine Environment
Protection Committee (MEPC) voted unanimously to adopt these amendments. The
revised Annex VI reduces 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)

30

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establishing
new tiers of stringent nitrogen oxide emissions standards for new marine
engines, depending on their date of installation. These amendments to Annex VI
are expected to enter into force on July 1, 2010, which is six months after the
deemed acceptance date of January 1, 2010. Once these amendments become
effective, we may incur costs to comply with these revised standards.

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 IMOs International
Management Code for the Safe Operation of Ships and Pollution Prevention, or
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, or Safety Management System,
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

31

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| |   |                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.

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

As a result of
2006 amendments to OPA 90, the liability of responsible parties under OPA 90
was increased to the greater of $950 per gross ton or $800,000 per non-tank
vessel (subject to periodic adjustment for inflation). 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.

Under OPA 90,
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 liabilities under OPA 90.
U.S. Coast Guard regulations require evidence of financial responsibility
in the amount of $1,250 per gross ton for non-tank vessels, which includes the
OPA 90 liability limit of $950 per gross ton for non-tank vessels and the
CERCLA liability limit of $300 per gross ton (see The U.S. Comprehensive
Environmental Response, Compensation, and Liability Act below for further
details). 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. 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

32

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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.

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. Currently, under
U.S. Environmental Protection Agency (EPA) regulations that have been in
place since 1978, vessels are exempt from the requirement to obtain CWA permits
for the discharge in U.S. ports of ballast water and other substances
incidental to the normal operation of vessels. However, on March 30, 2005, the
United States District Court for the Northern District of California ruled in Northwest
Environmental Advocates v. EPA, 2005 U.S. Dist. LEXIS 5373, that the EPA
exceeded its authority in creating an exemption for ballast water. On
September 18, 2006, the court issued an order granting permanent
injunctive relief to the plaintiffs, invalidating the blanket exemption in the
EPAs regulations for all discharges incidental to the normal operation of a
vessel as of September 30, 2008, and directing the EPA to develop a system
for regulating all discharges from vessels by that date. Under the courts
ruling, owners and operators of vessels visiting U.S. ports would be
required to comply with any CWA permitting program to be developed by the EPA
or face penalties. The District Courts decision was affirmed by the Ninth
Circuit Court of Appeals on July 23, 2008. In June 2008, the EPA proposed
rules governing the regulation of ballast water discharges and other discharges
incidental to the normal operation of vessels. Under the proposed rules,
commercial vessels would be required to obtain a CWA permit regulating such
discharges. The permit, which was finalized by EPA in December 2008,
incorporates current U.S. Coast Guard requirements for ballast water management
as well as supplemental ballast water requirements, and provides
technology-based and water-quality based limits for other discharges, such as
deck runoff, bilge water and gray water. Administrative provisions, such as
monitoring, recordkeeping and reporting requirements, are also included. 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. 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. Although the California rules were recently
struck down by the Ninth Circuit Court of Appeals as preempted by the CAA, the
state intends to request further judicial review. It could also seek a waiver
from the EPA to allow the adoption of such standards. The more stringent
proposed California rules were generally superseded when the U.S. ratified and
implemented the amended MARPOL Annex VI, as discussed above. However, new or
more stringent federal or state air emission regulations could require
significant capital expenditures to retrofit vessels and could otherwise
increase our operating costs.

33

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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 is developing a proposal to establish
ballast water discharge standards, which could set maximum acceptable 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. A challenge to the
Michigan law was dismissed by the federal district court and, in
November 2008, this decision was affirmed by the Sixth Circuit Court of
Appeals. Other states could adopt similar requirements that could increase the
costs of operation in state waters.

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 April 30, 2009, the BWM
Convention had been adopted by 18 states, representing 15.36% 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, the cost of compliance
could increase for oceangoing vessels. Although we do not believe that the
costs of compliance with a mandatory mid-ocean ballast exchange would be
material, it is difficult to predict the overall impact of such a requirement
on our business.

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.

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However, 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 California Attorney
General and a coalition of environmental groups in October 2007 petitioned
the EPA to regulate greenhouse gas emissions from ocean-going vessels under the
Clean Air Act. Any passage of climate control legislation or other regulatory
initiatives by the IMO, European Union, or 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 21 subsidiaries, 20 of which are incorporated in
Liberia and one of which is incorporated in the Republic of The Marshall
Islands. Of our Liberian subsidiaries, 18 either own vessels in our fleet
directly or indirectly or are parties to contracts to obtain newbuild vessels.
Our subsidiaries are wholly-owned by us. A list of our subsidiaries as of
May 15, 2009 is set forth in Exhibit 8.1 to this annual report.

|   |                              
|-- | -----------------------------
|D. | Property, Plant and Equipment

We have no
freehold or leasehold interest in any real property. We occupy office space at
32 Avenue Karamanli, 16605 Voula, Athens, Greece that is provided to us as
part of the services we receive under our management agreement. Other than our
vessels, we do not have any material property. Our vessels are subject to
first-priority

35

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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.

|         |                          
|-------- | -------------------------
|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 May 15, 2009
our fleet consisted of 13 drybulk vessels, and we had newbuild contracts for an
additional five vessels with an aggregate capacity of 631,000 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 May 15,
2009, our fleet was comprised of nine vessels employed on period time charters
and four vessels employed or intended to be employed upon redelivery on spot
charters. We believe our customers, some of which have been chartering our
vessels or vessels of our affiliates for over 20 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, 2006, 2007
and 2008 was 11.5, 10.7 and 11.1, respectively.

After delivery
of our contracted newbuilds, our drybulk fleet will consist of 18 vessels and
will have an aggregate carrying capacity of 1,692,900 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 will provide us and our subsidiaries with
technical, administrative and commercial services for an initial term expiring
on June 3, 2010, with automatic one-year renewals for an additional eight
years, at our option. Our Manager is ultimately owned by Machairiotissa
Holdings, 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                             

36

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | 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.
 During the three years ending December 31, 2008, our average annual
 fleet utilization rate was approximately 99.56%. However, an increase in
 annual off-hire days could reduce our operating days, and therefore, our
 fleet utilization. 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.                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | 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 charter and, as a result, generally our TCE
 rates equal our time charter rates.                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | 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, |       
|                                 |  |                         |       
|                                 |  | 2006                    |        | 2007 |   | 2008   |  
|                                 |  |                         |        |      |   |        |  
|Ownership
 days                  |  |                         | 4,208  |      |   | 3,914  |   |   | 4,075  |  
|Available
 days                  |  |                         | 4,208  |      |   | 3,914  |   |   | 4,040  |  
|Operating
 days                  |  |                         | 4,205  |      |   | 3,913  |   |   | 4,025  |  
|Fleet
 utilization               |  |                         | 99.94  | %    |   | 99.98  | % |   | 98.77  | %
|TCE rates                        |  | $                       | 22,550 |      | $ | 42,327 |   | $ | 49,626 |  
|Daily vessel
 operating expenses |  | $                       | 3,106  |      | $ | 3,176  |   | $ | 4,323  |  

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:

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| |   |                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 as
unearned revenue (see the section entitled Unearned 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 combined and consolidated statements of income.

Revenues from
our period time charters comprised 47.8%, 48.9% and 83.6%, respectively, of our
charter revenues for the years ended December 31, 2006, 2007 and 2008. The
revenues from our spot charters comprised 52.2%, 51.1% and 16.4%, respectively,
of our charter revenues for the year-ended December 31, 2006, 2007 and
2008.

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 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

Unearned revenue includes: (i) revenue
received prior to the balance sheet date relating to services to be rendered
after the balance sheet date amounting to $6.4 million as of December 31, 2008
and (ii) deferred revenue resulting from straight line revenue recognition in
respect of charter agreements that provide for varying charter rates of which
$2.1 million will be recognized as revenue during the period ending
December 31, 2009 and $11.8 million will be recognized as revenue during the period
from January 1, 2010 until March 31, 2015. We did not record any Unearned
revenue relating to varying charter rates for the years prior to 2008, as we
did not have any charter agreements before 2008 that provided for such varying
charter rates. For more information, refer to Note 19 to our financial
statements.

Commissions

We pay
commissions ranging from 1.25% 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 five remaining contracted
newbuilds and as a result

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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.

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 shortage in the supply of qualified personnel. In
addition, we expect that insurance costs, drydocking and maintenance costs will
increase as our vessels age. Our total vessel operating expenses, which
generally represent fixed costs, have historically increased as a result of the
enlargement of our fleet. We expect these expenses to increase further as a
result of the acquisition of our remaining contracted newbuilds, and as we
further expand our fleet. Other factors beyond our control, some of which may
affect the shipping industry in general, including changes in the market price
of lubricants due to increases in oil prices, may also cause these expenses to
increase. In addition, a portion of our vessel operating expenses, primarily
crew wages 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.

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. 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.

Prior to our
initial public offering which was completed in June 2008, we financed vessel
construction through interest-free owners advances during the relevant periods
and utilized the specific loan method of accounting. As a result, no interest
was capitalized as a component of vessel cost for the year ended December 31,
2007. For the year ended December 31, 2008, we capitalized interest amounting
to $304,115.

Since January
1, 2005, our Manager has received a commission of 1.0% of the contract price of
vessel purchases upon delivery of our acquired vessels through separate
arrangements with Itochu Corporation, a trading house that has facilitated such
purchases and which is also the counterparty in the applicable newbuild
contracts. Under our management agreement with our Manager, for purchases of vessels
including with respect to each of our five 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

39

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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 will be 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,
incremental director and officer liability insurance costs, director
compensation and costs related to compliance with the Sarbanes-Oxley Act of
2002.

In relation to
management fees, during the period from January 1, 2005 to December 31,
2007, we paid our Manager a management fee of $50,000 per year for each vessel
in our fleet and a fee of 0.4% on gross freight, charter hire, ballast bonus
and demurrage, excluding any amortization of time charter discount to revenue.
The management fee has been recorded as a general and administrative expense.
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 management agreement to replace our then existing arrangements with our
Manager. Under our new 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.

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

In relation to
expenses paid to third parties associated with us being a public company, our
financial statements for periods prior to our initial public offering which was
completed in June 2008 show our results of operations as a private company
when we did not pay any compensation to our directors and officers. 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,
incremental director and officer liability insurance costs, director
compensation and costs related to compliance with the Sarbanes-Oxley Act of
2002.

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 included in
our finance costs and 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.

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
costs.

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Gain on Sale of
Assets

Our
subsidiary, Maxpente, and certain other entities that were under common control
with our subsidiaries prior to our initial public offering which was completed
in June 2008 (but which were not transferred to Safe Bulkers, Inc. in
connection with the offering), each owned vessels that were sold during the
years ended December 31, 2006 and 2007. Below is a table listing the
vessels, their classes, the names of the owning entities prior to disposal and
dates of disposal.

|                                |  |           |  |                                  |  |                   
|------------------------------- |  | --------- |  | -------------------------------- |  | ------------------
|Vessel Name                     |  | Class     |  | Owner                            |  | Disposal Date     
|                                |  |           |  |                                  |  |                   
|Pelopidas                       |  | Panamax   |  | Pelodimous
 Shipping Corporation |  | November 30,
 2006
|                                |  |           |  |                                  |  |                   
|Sophia (the Old Sophia) (1)   |  | Panamax   |  | Sofikal
 Shipping Corporation    |  | April 11,
 2006   
|                                |  |           |  |                                  |  |                   
|Pedhoulas Farmer                |  | Kamsarmax |  | Maxpente
 Shipping Corporation   |  | January 9,
 2007  
|                                |  |           |  |                                  |  |                   
|Pedhoulas Fighter               |  | Kamsarmax |  | Maxtria
 Shipping Corporation    |  | January 26,
 2007 
|                                |  |           |  |                                  |  |                   
|Kanaris (the Old Kanaris) (1) |  | Panamax   |  | Kanastro
 Shipping Corporation   |  | February 20,
 2007
|                                |  |           |  |                                  |  |                   
|Eleni (the Old Eleni) (1)     |  | Panamax   |  | Eleoussa
 Shipping Corporation   |  | March 26,
 2007   

|    |                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | Certain of
 the sold vessels have the same name as certain vessels in our current fleet,
 and we refer to these sold vessels as the Old Sophia, Old Kanaris and Old Eleni,
 as applicable.

The aggregate
gains on the sale of these assets were as follows:

|                        |              |  |   |               |  |   |      | 
|----------------------- | ------------ |  | - | ------------- |  | - | ---- | 
|Year Ended December 31,
|                       
|                        | 2006         |  |   | 2007          |  |   | 2008 | 
|                        |              |  |   |               | 
|$                       | 37.0 million |  | $ | 112.4 million |  | $ |     | 
|                        |              |  |   |               | 

In connection
with each of these asset sales, 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. We expect that gains from vessel sales will decrease in
the future as we do not expect to sell vessels at the same rate as vessels have
been sold between January 1, 2006 and December 31, 2007. We expect that
commissions payable to our Manager on vessel sales will decrease for the same
reason.

Early Redelivery
Cost

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.

We have
entered into such arrangements for early redelivery and incurred such costs in
the past, and we may continue to do so in the future, depending on market
conditions. On March 9, 2007, we agreed with the charterers of the Stalo
to terminate the then-existing period time charter on the vessel. The period time
charter had commenced on January 18, 2006, at a daily gross charter rate of
$13,500 and was contractually due to expire in May 2011. We desired to
terminate the charter because the contracted charter rate was significantly
lower than the charter rates that we could receive for the vessel in March
2007. Under the new agreement with the charterer, (a) we were required to pay
the charterer $3.4 million upon termination of the old period time charter and
redelivery of the vessel and (b) the charterer was offered the opportunity to
charter the Marina,
Sophia and Pedhoulas Leader under period time
charters for periods of up to 5 to 14 months at below-market rates. The total
cost of the early termination of the Stalo period time charter amounted to
$14.4 million, which was more than offset by subsequently fixing the Stalo
on

41

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two spot
charters, at daily charter rates of $47,500 and $50,000, prior to entering into
a two-year period time charter from July 2007 until August 2009, at a daily
charter rate of $48,500.

On
September 20, 2007, we entered into an agreement, at our request, with the
then-current charterer of the Katerinato terminate the charter earlier
than the originally scheduled termination date of November 9, 2007. As
compensation for early redelivery, we agreed to pay the charterers an amount
equal to $1.1 million, which was more than offset by subsequently fixing the Katerina
on a spot charter during the period from September 30, 2007 until November
9, 2007, which generated revenue of $3.1 million.

On October 17,
2007, we entered into an agreement, at our request, with the then-current
charterer of the Marina to terminate the charter earlier than the originally
scheduled termination date of May 22, 2008 in connection with the redelivery of
the Stalo,
as described above. The charter had commenced on March 26, 2007 at a daily
gross charter rate of $25,000. The Marina was redelivered on January 30,
2008, and the actual compensation payable to the charterer amounted to $6.5
million. The vessel was fixed on a spot charter until April 23, 2008 at a daily
rate of $56,500 and has been subsequently fixed on another spot charter until
June 29, 2008 at a daily rate of $94,000.

On March 7,
2008, Petra 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, Petra agreed to pay the charterers an amount of $0.8
million. The vessel was redelivered on June 8, 2008, and was subsequently fixed
at a daily charter rate of $76,500 until August 1, 2008.

Critical Accounting
Policies

We prepared
our combined and 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.

Revenue and Related
Expense Recognition

We generate
revenues from charterers for the charter hire of our vessels. Vessels are
chartered mainly under time charters, 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. The daily charter rate can be either a fixed
amount or it can vary over the term of the contract. 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. Revenue is recognized
as earned on a straight line basis over the charter period in respect of
charter agreements that provide for varying rates. Revenues from a 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) that is recognized
as revenue over the term of the charter, and other miscellaneous revenues from
vessel operations.

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 combined and
consolidated statements of income.

Expenses
relating to our time charters are vessel operating expenses and certain voyage
expenses, which are paid for by us. These expenses are recognized as incurred.
Vessel operating expenses that we pay for 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. Voyage expenses that we pay for include costs
for draft surveys, hold cleaning, postage and other minor miscellaneous
expenses related to the voyage and recognize as incurred. 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).

42

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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

We apply SFAS
No. 144, Accounting for the Impairment or Disposal of Long-lived Assets
(SFAS 144), which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. The standard requires that
long-lived assets and certain identifiable intangibles held and used or
disposed of by an entity be reviewed 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, 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 newbuildings. Historically, both
charter rates and vessel values tend to be cyclical. Undiscounted projected
operating cash flows, vessel sales and purchases, business plans and overall
market conditions are considered as potential impairment indicators. We determine
undiscounted projected net operating cash flow for each vessel and compare it
to the vessel carrying value. In this respect, management reviews the carrying
amount of our vessels in connection with the estimated recoverable amount for
each of our vessels. The undiscounted cash flows incorporate various factors
such as estimated future charter rates, estimated scrap values, future
drydocking costs, estimated vessel operating costs and estimated vessel
utilization rates. 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. No impairment loss was recorded for any of the periods
presented.

Recent Accounting
Pronouncements

In December
2007, the FASB issued SFAS No. 141 (revised), Business Combinations (SFAS
141 (revised)). SFAS 141 (revised) relates to business combinations and
requires the acquirer to recognize the assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition
date, measured at their fair values as of that date. This Statement applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. An entity may not apply it before that date. We must adopt
this standard as of January 1, 2009. As the provisions of SFAS 141
(revised) are applied prospectively, the impact to us cannot be determined
until any such transaction occurs.

In December
2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statementsan amendment of Accounting Research Bulletin No. 51
(SFAS 160), which establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent, the
amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parents ownership interest and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. The Statement also establishes reporting requirements that
provide sufficient disclosures that clearly identify and distinguish between
the interests of the parent and the interests of the noncontrolling owners.
SFAS 160 is effective as of the beginning of an entitys fiscal year that
begins after December 15, 2008, which will be our fiscal year beginning January
1, 2009. Our adoption of SFAS 160 as from January 1, 2009 will not have any
effect on our results of operations, financial position or cash flows.

In March 2008,
the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities (SFAS 161) which requires enhanced disclosures in respect
of derivative instruments and hedging activities. It is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008,

43

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with early
application encouraged. As this statement relates only to disclosure
requirements, the adoption of SFAS 161 will not have an impact on our financial
position, results of operations or cash flows.

Results of
Operations

Year ended December
31, 2008 compared to year ended December 31, 2007

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, 2007, we had an average of 10.7
drybulk vessels in our fleet.

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

During the
year ended December 31, 2007, we acquired the following vessels: Pedhoulas
Leader, a Kamsarmax class vessel and Sophia, a Post-Panamax class
vessel.

During the
year ended December 31, 2007, we sold the following vessels: two Panamax class
vessels, Old
Kanaris and Old Eleni. During this period, we also
sold two Kamsarmax class vessels, Pedhoulas Farmer and Pedhoulas Fighter,
immediately upon their delivery to us from the shipyard, pursuant to agreements
with the purchasers of these vessels.

Revenues

Revenues
increased by 21.1% or $36.3 million to $208.4 million during the year ended
December 31, 2008, from $172.1 million during the year ended December 31, 2007.
This increase is attributable primarily to an increase in the daily charter
rates payable under our charters (the TCE rate for 2008 was $49,626, compared
to a TCE rate of $42,327 for 2007) and an increase in operating days for the
year ended December 31, 2008 by 2.9% to 4,025 days, compared to 3,913 operating
days for the year ended December 31, 2007. The increase in the operating days
was due to the operation of the vessels Pedhoulas Leader and Sophia for the full year
2008 (both vessels were delivered during the year 2007) and the delivery of the
vessel Eleni
in November 2008.

Commissions

Commissions to
unaffiliated ship brokers, other brokers associated with our charterers and our
charterers during the year ended December 31, 2008 amounted to $7.6 million, an
increase of $1.4 million, or 22.6%, compared to $6.2 million during the year
ended December 31, 2007, primarily due to the increase in our revenues.
Commissions as a percentage of our revenues were stable at 3.65% and 3.60% for
the years ended December 31, 2008 and 2007, respectively.

Vessel operating expenses

Vessel
operating expenses increased by 41.9%, or $5.2 million to $17.6 million during
the year ended December 31, 2008, from $12.4 million during the year ended
December 31, 2007. The increase of our vessel operating expenses was primarily
due to the increase of the costs for (i) repairs, maintenance and drydocking,
(ii) crewing, (iii) insurance, (iv) lubricants and (v) spares, stores and
provisions.

During the
year ended December 31, 2008 the cost for repairs, maintenance and drydocking
increased by 633.3%, or $1.9 million, to $2.2 million, compared to $0.3 million
during the year ended December 31, 2007, primarily due to the cost of
drydocking four of our vessels in 2008 (Efrossini, Maria, Vassos, Katerina), compared to no
vessel drydockings in 2007.

During the
year ended December 31, 2008 the costs for crewing increased by 20.6%, or $1.4
million, to $8.2 million, compared to $6.8 million during the year ended
December 31, 2007. This increase is primarily attributable to (i) increased
salaries for our crews, (ii) the strengthening exchange rate of the euro
against the U.S. dollar for our Greek crew members who are paid in euros and
(iii) an increase in ownership days by 4.1% to 4,075 days in 2008, from 3,914
days in 2007.

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During the year
ended December 31, 2008 the cost for insurance increased by 50.0%, or $0.7
million, to $2.1 million, compared to $1.4 million during the year ended
December 31, 2007 mainly due to increased insured vessel values.

During the
year ended December 31, 2008 the cost for lubricants increased by 26.7%, or
$0.4 million, to $1.9 million, compared to $1.5 million during the year ended
December 31, 2007 due to increased lubricants prices and the higher average
number of vessels in our fleet.

During the
year ended December 31, 2008 the cost for spares, stores and provisions
increased by 41.2%, or $0.7 million, to $2.4 million, compared to $1.7 million
during the year ended December 31, 2007 due to increased prices for stores and
provisions and the additional number of spares required for drydockings.

As a result,
daily operating expenses increased by 36.1% during the year ended December 31,
2008, to $4,323 per day, compared to $3,176 per day during the year ended
December 31, 2007.

Depreciation

Depreciation
expense increased by 10.4% during the year ended December 31, 2008, to $10.6
million compared to $9.6 million during the year ended December 31, 2007, due
to the increase in ownership days from 3,914 during the year ended December 31,
2007, to 4,075 during the year ended December 31, 2008, as well as higher costs
for the most recent additions to our fleet.

General and administrative expenses

General and
administrative expenses, increased 116.2%, or $4.3 million, to $8.0 million
during the year ended December 31, 2008, from $3.7 million during the year
ended December 31, 2007. The increase is attributable to (i) an increase in
remuneration paid to our Manager of $3.2 million, from $1.2 million in 2007 to
$4.4 million in 2008, as a result of changes to our management terms with our
Manager effective from January 1, 2008 and ii) an increase in expenses
associated with our initial public offering and our operation as a public
company of 44%, or $1.1 million, from $2.5 million in 2007 to $3.6 million in
2008.

Interest expense

Interest
expense increased by $8.2 million, or 100.0%, to $16.4 million during the year
ended December 31, 2008 from $8.2 million during the year ended December 31,
2007. The increase in interest expense was due to the increase in the weighted
average amount of loans outstanding to $408.6 million for the year ended
December 31, 2008, compared to $241.9 million for the year ended December 31,
2007, as well as the increase in the weighted average interest rate of our
outstanding indebtedness to 4.03% p.a. for the year ended December 31, 2008,
from 3.35% p.a. for the year ended December 31, 2007.

Loss on derivatives

Loss on
derivatives increased by $18.8 million to a loss of $19.5 million during the
year ended December 31, 2008, from a loss of $0.7 million during the year ended
December 31, 2007. The increase of $18.8 million includes the effect from
foreign exchange derivatives as well as from interest rate derivatives. The
effect from interest rate derivatives, which amounted to an increase of $21.7
million in losses, was mainly as a result of the mark-to-market valuation of
interest rate swap transactions and was partly offset by the effect from the
gains from foreign exchange derivatives of $2.4 million, due to favorable
movements of the rates of the currencies in which the derivatives contracts
were denominated. At December 31, 2008, the aggregate notional amount of
interest rate swap transactions outstanding was $445.2 million, compared to
$40.0 million at December 31, 2007. These swaps economically hedged the
interest rate exposure of approximately 95% of the companys aggregate loans
outstanding as of December 31, 2008, which includes the additional interest
rate swap transaction entered into as of December 31, 2008 with an inception
date of January 7, 2009. The mark-to-market valuation of these interest rate
swap transactions at the end of each quarter is affected by the prevailing
comparable interest rates at that time.

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Foreign currency loss

Foreign
currency loss was $9.5 million during the year ended December 31, 2008,
compared to $13.8 million during the year ended December 31, 2007, representing
a reduction of losses of $4.3 million. 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 is denominated in foreign currency as of
March 31, 2009.

Gain on sale of assets

Gain on sale
of assets for the year ended December 31, 2007 reflects the sale of the vessels
Old
Kanaris, Old Eleni, Pedhoulas Farmer and Pedhoulas
Fighter to third party drybulk operators for an aggregate contract
price of $220.2 million, representing a gain of $112.4 million over the net
book value of such vessels at the time of sale. In connection with these sales,
we paid our Manager an aggregate of $2.2 million in commissions. There were no
such transactions during the year ended December 31, 2008.

Year ended
December 31, 2007 compared to the year ended December 31, 2006

During the
year ended December 31, 2007, we had an average of 10.7 drybulk vessels in
our fleet. During the year ended December 31, 2006, we had an average of
11.5 drybulk vessels in our fleet.

During the
year ended December 31, 2007, we acquired the following vessels: Pedhoulas
Leader, a Kamsarmax class vessel and Sophia, a Post-Panamax class
vessel.

During the
year ended December 31, 2007, we sold the following vessels: two Panamax
class vessels, Old Kanaris and Old Eleni. During this period, we also
sold two Kamsarmax class vessels, Pedhoulas Farmer and Pedhoulas Fighter,
immediately upon their delivery to us from the shipyard, pursuant to agreements
with the purchasers of these vessels.

During the
year ended December 31, 2006, we acquired the following vessels: two
Post-Panamax class vessels, Marina and Stalo, and two Kamsarmax
class vessels, Pedhoulas Merchant and Pedhoulas Trader.

During the
year ended December 31, 2006, we sold the following vessels: two Panamax
class vessels, Old Sophia and Pelopidas.

Revenues

Revenues
increased by 73.8% or $73.1 million to $172.1 million during the year ended
December 31, 2007, from $99.0 million during the year ended
December 31, 2006. This increase is attributable primarily to an increase
in the daily charter rates payable under our charters. Revenues were also
affected by a decrease in the number of operating days due to sales of the
vessels Kanaris
and Old
Eleni, which were not offset by the deliveries of Pedhoulas
Leader and Sophia. During the year ended
December 31, 2007, our operating days decreased by 6.9% to 3,913 days,
compared to 4,205 operating days for the year ended December 31, 2006.

Commissions

Commissions to
unaffiliated ship brokers, other brokers associated with our charterers and our
charterers during the year ended December 31, 2007 amounted to $6.2
million, an increase of $2.5 million, or 67.6%, compared to $3.7 million during
the year ended December 31, 2006 and were 3.74% and 3.60% of revenues
during the years ended December 31, 2006 and 2007, respectively. The
increase in such commissions resulted primarily from the increase in daily
charter rates and was similarly affected by the decrease in operating days due
to vessel sales.

Vessel operating expenses

Vessel
operating expenses decreased by 5.3%, or $0.7 million to $12.4 million during
the year ended December 31, 2007, from $13.1 million during the year ended
December 31, 2006. The decrease is primarily attributable to the 6.9%
decrease in operating days during the year ended December 31, 2007 as
compared to the year ended December 31, 2006 resulting from vessel sales.
The primary components of our vessel operating expenses such as

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costs for
crewing, and insurances, were moderately increased, while all other cost
components decreased. During the year ended December 31, 2007 costs for
crewing increased by 3.0%, or $0.2 million, to $6.8 million, compared to $6.6
million during the year ended December 31, 2006.

This increase
was primarily due to the rising cost of crew salaries, in particular for our
Greek crew members who are paid in euros, as a result of the rising strength of
the euro compared to the U.S. dollar since December 31, 2006. During
the year ended December 31, 2007 the cost for insurance increased by 7.7%,
or $0.1 million, to $1.4 million, compared to $1.3 million during the year
ended December 31, 2006, and the cost for lubricants during this period
remained stable. Daily operating expenses remained relatively constant during
the year ended December 31, 2007, at $3,176 per day, compared to $3,106
per day during the year ended December 31, 2006.

Depreciation

Depreciation
expense remained constant during the year ended December 31, 2007, at $9.6
million compared to $9.6 million during the year ended December 31, 2006.
This reflects the relatively constant number of ownership days as a result of
vessel acquisition and vessel sales.

General and administrative
expensesManagement fee to related party

General and
administrative expenses, which consisted of management fees paid to our
Manager, increased by 20.0%, or $0.2 million, to $1.2 million during the year
ended December 31, 2007, from $1.0 million during the year ended
December 31, 2006 due to an increase in our revenues.

Interest expense

Interest
expense increased by $2.1 million, or 34.4%, to $8.2 million during the year
ended December 31, 2007 from $6.1 million during the year ended
December 31, 2006. The increase in interest expense was due to the
increase in the weighted average amount of loans outstanding to $241.9 million
during the year ended December 31, 2007, compared to $183.0 million during
the year ended December 31, 2006, as well as the increase in the weighted
average interest rate during the year ended December 31, 2007 to 3.35%
from 3.27% during the year ended December 31, 2006.

Loss on derivatives

Loss on
derivatives decreased by $1.3 million, or 64.14%, to a loss of $0.7 million
during the year ended December 31, 2007, from a loss of $2.0 million
during the year ended December 31, 2006. The decrease of $1.3 million
includes the effect from foreign exchange derivatives as well as from interest
rate derivatives. The effect from foreign exchange derivatives, which amounts
to a decrease of $1.5 million in losses, was due to the declining volume of
derivatives contracts in the periods under comparison, as on December 31,
2007 there were no derivative contracts outstanding, versus a notional amount
of $13.5 million of such contracts on December 31, 2006. The effect of the
interest rate swap concluded on the Kerasies loan amounted to a loss of $0.2
million, representing the negative fair value as of December 31, 2007. No
interest rate derivatives were outstanding as of December 31, 2006.

Foreign currency loss

Foreign
currency loss was $13.8 million during the year ended December 31, 2007,
compared to $3.3 million during the year ended December 31, 2006,
representing a change of $10.5 million resulting primarily from more
unfavorable currency translation between the U.S. dollar against the
Japanese yen and the Swiss franc. As two loans in foreign currencies were
converted during 2007 to the U.S. dollar, the outstanding percentage of
principal in foreign currencies was reduced to 47.3% as of December 31,
2007, reducing the exposure to foreign currency differences in the future.

Gain on sale of assets

Gain on sale
of assets for the year ended December 31, 2007 reflects the sale of the
vessels Old
Kanaris, Old Eleni, Pedhoulas Farmer and Pedhoulas
Fighter to third party drybulk operators for an aggregate contract
price of $220.2 million, representing a gain of $112.4 million over the net
book value of such vessels at the time of sale. In

47

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connection
with these sales, we paid our Manager an aggregate of $2.2 million in
commissions. Gain on sale of assets for the year ended December 31, 2006
reflects the sale of the vessels Pelopidas and Old Sophia to third party
drybulk operators for an aggregate contract price of $78.1 million,
representing a gain of $37.0 million over the net book value of such vessels at
the time of sale. In connection with these sales, we paid our Manager an
aggregate of $0.8 million in commissions.

|   |                                
|-- | -------------------------------
|B. | Liquidity and Capital Resources

Historically
prior to our initial public offering, our principal sources of funds have been
owners advances, operating cash held on our behalf by our Manager, long-term
bank borrowings of our subsidiaries and cash from vessel sales held on our
behalf by our Manager. In the past, our principal use of funds has been capital
expenditures to establish, grow and maintain our fleet, comply with
international shipping standards, environmental laws and regulations, fund
working capital requirements, make repayments of bank loans and owners advances
and, more recently, pay dividends.

As of December
31, 2008, we, through our subsidiaries, had an aggregate debt outstanding of
$468.3 million (based on prevailing exchange rates as of that date) under
various credit agreements to finance the purchase of the vessels owned by our
subsidiaries, comprised of outstanding amounts in U.S. dollars and Swiss
francs. In addition, in February 2009 our subsidiary, Eniadefhi, made aggregate
drawings of $40.0 million under a credit facility to finance the purchase of
our vessel Martine
and to provide working capital. As of March 31, 2009, our aggregate debt
outstanding was $497.3 million, all of which was denominated in U.S. dollars
and as of that date, all of our newbuild contracts required payments in U.S.
dollars. However, we will still be exposed to currency fluctuations with
respect to the euro in connection with certain of our vessel operating
expenses, such as crew wages to our Greek crew members.

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 shareholders.
We anticipate that our primary sources of funds will be cash from operations,
additional indebtedness to be used for the purchase of our contracted newbuilds
and to meet working capital requirements and, possibly, equity financings. As
of May 15, 2009, we will need to make payments in the aggregate of $307.9
million through 2010 to the shipyards or third party sellers in order to take
delivery of our contracted newbuilds, of which amount $165.6 million is payable
over the remainder of 2009, and $142.3 million is payable in 2010.

We currently
estimate that internally generated cash flow and borrowings under our existing
credit facilities will be sufficient to fund the operations of our fleet,
including our working capital requirements, through at least the end of 2009.
Beginning in 2010, we expect to require additional indebtedness to partially
fund our remaining commitments of an estimated $142.3 million with respect to
our newbuilds. To the extent that we are unable to obtain such additional
indebtedness, we will need to find alternative financing, unless delivery of
one or more of our newbuilds is delayed or cancelled. If we are unable to find
alternative financing, our subsidiaries will not be capable of funding their
relevant commitments for capital expenditures relating to our contracted
newbuilds, which could adversely impact the dividends we intend to pay, and
could have a material adverse effect on our business, financial condition and
results of operations.

Depending on
market conditions at the time, we may in the future seek to negotiate the
termination of certain of our newbuild contracts. On April 30, 2009, we
cancelled the newbuild contracts for two Kamsarmax vessels to be acquired by
our subsidiaries Maxdeka and Maxenteka. In connection with these cancellations,
we paid aggregate cancellation fees of $14.4 million to the relevant sellers,
which were more than offset by savings of $89.6 million in installment payments
that would have been made had we taken delivery of the newbuilds. We did not
have charter agreements arranged with respect to these newbuilds. See Item 3.
Key InformationD. Risk FactorsRisks Inherent in Our Industry and Our
Business for a discussion of the risks related to the termination of any of
our newbuild contracts.

Our future
liquidity will impact our dividend policy. We expect that our contracted
revenues and additional indebtedness when compared with our anticipated capital
expenditure, operating and general and administrative expenses and financing
costs will provide the liquidity necessary to support our dividend policy and
our growth. If we are unable to secure the additional borrowings required to
take delivery of our contracted newbuilds, our ability to pay dividends will be
adversely affected. We paid our first quarterly dividend of $0.1461 per share
in August

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2008, and
subsequent dividends of $0.475 per share in November 2008 and $0.15 per share
in February 2009, respectively. On May 6, 2009 we declared a dividend of
$0.15 per share to all shareholders of record as of May 22, 2009, payable
on or about May 29, 2009. In March and April 2008, prior to our initial
public offering, we paid a dividend of $147.8 million to our owners Polys Hajioannou
and Nicolaos Hadjioannou, which was funded from amounts due from our Manager.
An additional dividend of $27.6 million, funded using amounts due from our
Manager and reflecting a portion of estimated net income earned from January 1,
2008 until the date immediately prior to our initial public offering, was also
paid in May 2008 to our owners.

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 availability, (b) our ability to obtain
debt and equity financing on acceptable terms as contemplated by our growth
strategy, (c) provisions of Marshall Islands law governing the payment of
dividends, (d) restrictive covenants in our existing and future debt
instruments and (e) global financial conditions. We can give no assurance that
dividends will be paid in the future.

As of December
31, 2008 we had $86.4 million in cash of which $27.7 million comprises cash and
cash equivalents, $21.3 million comprises short-term bank deposits with
original maturities longer than three months and shorter than twelve months,
$32.6 million comprises short-term restricted cash and $4.8 million comprises
long-term restricted cash; we also had aggregate indebtedness of $468.3 million
plus available borrowing capacity of $45.0 million under one additional credit
facility for our subsidiary Eniadefhi. During 2008, we paid back to our
principal stockholders from surpluses from operations advances we had received
on March 4, 2008, in relation to the payment for vessels under construction of
¥800 million (the equivalent of $7.7 million, based on a ¥104.5/$1.00 exchange
rate), and on May 27, 2008, in relation to the payment for a vessel under
construction of an additional ¥400 million (the equivalent of $3.8 million,
based on a ¥105.05/$1.00 exchange rate).

As of
March 31, 2009, we had $150.5 million in cash of which $13.0 million
comprises cash and cash equivalents, $12.0 million comprises short-term bank
deposits with original maturities longer than three months and shorter than
twelve months, $120.6 million comprises short-term restricted cash and $4.9
million comprises long-term restricted cash. As of March 31, 2009, we also
had aggregate indebtedness of $497.3 million.

We had
approximately $45.0 million and $5.0 million of undrawn amounts available under
our credit facilities, as of December 31, 2008 and March 31, 2009,
respectively.

Cash Flows

Cash and cash
equivalents increased to $27.7 million as of December 31, 2008. 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.

Prior to our
initial public offering which was completed in June 2008, the cash we generated
from operating activities was reflected as cash used in operating activities,
mainly as a result of our arrangements with our Manager. Under our historical
arrangements with our Manager, our Manager undertook the execution of all
financial transactions on our behalf with respect to third parties and our
owners. As a result, all of our cash from a period, including cash from
operating activities, investing activities and financing activities, was
maintained in the name of our Manager and was reflected as amounts Due from
Manager in the combined statements of cash flows until the year ended December
31, 2007. Since our initial public offering, all cash we generate from our
operating, investing and financing activities is being maintained in our name
or in the names of our subsidiaries.

Net Cash (Used in)/Provided by Operating
Activities

Net cash
provided by operating activities decreased by $18.9 million, to $259.6 million
in 2008 compared to $278.5 million in 2007. The increase was primarily
attributable to the absence of any gain from vessel sales during 2008 as
opposed to $112.4 million from vessel sales during 2007, partially offset by
the reduction of the amounts Due from Manager by $95.6 million.

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For the year
ended December 31, 2007 amounts Due from Manager decreased by $143.0 million
(which includes the $88.4 million of net cash provided by investing activities
shown below in the section Net Cash (Used in)/Provided by Investing
Activities and the $366.9 million of net cash used in financing activities
shown below in the section Net Cash (Used in)/Provided by Financing
Activities) compared to an increase of $83.0 million (which includes the $33.8
million of net cash used in investing activities shown below in the section
Net Cash (Used in)/Provided by Investing Activities and the $46.6 million of
net cash provided by financing activities shown below in the section Net Cash
(Used in)/Provided by Financing Activities) for the year ended December 31,
2006. This decrease of $143.0 million during the year ended December 31, 2007,
was mainly due to settlement of intercompany accounts with our Manager and our
owners, including dividend payments of $383.9 million, partially offset by
increased proceeds from long-term debt.

Net Cash (Used in)/Provided by Investing
Activities

Net cash flows
(used in) investing activities were $(148.2) million for the year ended
December 31, 2008 compared to net cash flows provided by investing activities
of $88.4 million for the year ended December 31, 2007. The increase of cash
flows (used in) investing activities of $236.6 million from 2007 is mainly
attributable to the decrease in proceeds from the sale of vessels, as during
the year ended December 31, 2008 we did not sell any vessels, while during the
year ended December 31, 2007, we sold four vessels.

Net cash flows
provided by investing activities were $88.4 million for the year ended December
31, 2007 compared to net cash flows (used in) investing activities of $(33.8)
million for the year ended December 31, 2006. This increase of $122.2 million
from 2006 is mainly attributable to an increase in proceeds from the sale of
vessels, as during the year ended December 31, 2007, we sold four vessels,
while during the year ended December 31, 2006, we sold two vessels.

Net Cash (Used in)/Provided by Financing
Activities

Net cash flows
(used in) financing activities were $(83.7) million for the year ended December
31, 2008 compared to net cash flows (used in) financing activities of $(366.9)
million for the year ended December 31, 2007. This decrease of $283.2 million
compared to 2007 is largely attributable to a $187.8 million net decrease in
our repayment of owners advances and a $174.6 decrease in dividend payments,
partially offset by a $22.6 million increase in proceeds from long-term debt
compared to 2007 and an increase of $29.1 million in long-term debt principal
payments.

Net cash flows
(used in) financing activities were $(366.9) million for the year ended
December 31, 2007 compared to net cash flows provided by financing activities
of $46.6 million for the year ended December 31, 2006. This decrease is largely
attributable to a $144.1 million increase in our repayment of owners advances
compared to 2006 and dividend payments of $383.9 million, partially offset by a
$138.6 million increase in proceeds from long-term debt compared to 2006.

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 range from 10 to 15 years, and they are repaid by semi-annual
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 2008,
we drew down loans totaling $221.6 million and we repaid $85.5 million of our
indebtedness. As of December 31, 2008, we through our subsidiaries had twelve
outstanding credit facilities with a combined outstanding balance of $468.3
million. These credit facilities have maturity dates between 2017 and 2023. For
a description of our credit facilities as of December 31, 2008, please see Note
8 to our financial statements included at the end of this annual report. During
2009, we plan to repay approximately $54.8 million of our long-term debt
outstanding as of December 31, 2008. In February 2009, we drew down a loan of
$40.0 million to finance the

50

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acquisition of
one of our vessels and increase our cash reserves. For more information
regarding this credit facility, please refer to Notes 11 (a) and 24 (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 dividend;                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | permit us to
 pay dividends if, during the twelve month period ending March 31, 2010, one
 of our charters is cancelled, any of its terms are waived or the payments
 under such charter decrease, unless we are able to demonstrate to the
 lenders satisfaction that we have the necessary cash resources to meet our
 newbuild commitments and maintain a minimum cash balance of $25.0 million.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | 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;                                                                                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | permit the
 Hajioannou family to reduce its shareholding in us below 51%; 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.                                                                                                                                                                                                                                                                        

51

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|                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                                                                                       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 divided by our total consolidated assets must not
 exceed 70% (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 $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;                                                                                                                                                                             
|                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                              |  | 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, 2008, we were in compliance with all covenants with respect to the Pemer,
Petra and Staloudi credit facilities.

We entered
into supplemental agreements in relation to the Marathassa, Marinouki, Kerasies
and Soffive credit facilities dated April 6, 2009 and in relation to the
Efragel, Avstes, Pelea, Marindou, Eniaprohi and Eniadefhi credit facilities on
March 31, 2009, with the respective lenders.

Pursuant to
letter agreements relating to the Marathassa, Marinouki, Kerasies and Soffive
credit facilities dated February 18, 2009, our lender confirmed that we
were in compliance with the Minimum Value Covenant as of December 31,
2008, on the basis of the lenders amended Minimum Value Covenant proposal set
forth in those letter agreements. We accepted this amended Minimum Value
Covenant proposal by entering into supplemental agreements with our lender
dated April 6, 2009, which superseded the prior letter agreements.
Pursuant to the supplemental agreements, the market value of the security
vessel for each facility was amended to include the fair market value of any
attached charter, and the margin was amended. The supplemental agreements
further provide for a reduction of the margin by 10 basis points to that part
of the loan balance that is equal to the amount of cash maintained in an
account pledged in favor of the lender, provided that: (i) such pledged amount
is on deposit for the entire duration of the applicable interest period, and in
any case for not less than three months, and (ii) there is no change in the
capital adequacy treatment applying to the borrowers account pledge that is
detrimental to the lender. Our lender has subsequently confirmed to us by
letters dated April 29, 2009 that as of April 6, 2009 there is no
breach of covenant or warranty that exists or is continuing in relation to the
relevant credit facilities. Although not asserted by the lender, we believe
that we were in breach of the original terms of these facilities prior to
signing the letter agreements with our lender, but such breach was cured by
entry into the letter agreements and supplemental agreements, as confirmed by
the letters dated April 29, 2009. We are currently in compliance with the
amended terms.

Pursuant to a
letter agreement relating to the Efragel, Avstes, Pelea, Marindou, Eniaprohi
and Eniadefhi credit facilities, dated February 6, 2009, our lender asserted
breaches of the Consolidated Leverage Covenant, Consolidated Net Worth Covenant
and Minimum Value Covenant and waived compliance with these provisions until
March 31, 2009. Under subsequent supplemental agreements relating to these
facilities, each dated March 31, 2009, the lender has waived, with effect
from December 31, 2008, any events of default that may have occurred
between December 31, 2008 and March 30, 2009, with respect to any
breach of the Minimum Value Covenant, the Consolidated Leverage Covenant,
Consolidated Net Worth Covenant and Debt to EBITDA Ratio Covenant. We have
undertaken to prepay on the next interest payment date relating to each of the
relevant credit facilities an

52

---



amount
sufficient to restore compliance with the Minimum Value Covenant for each facility.
These next interest payment dates fall at various times between April 20
and July 17, 2009. The prepayments for each credit facility will be
applied in order of maturity for the three principal payments following the
next rollover date and applied pro rata thereafter. We estimate that this will
require a payment of approximately $35.9 million, that we have deposited with
the lender. In addition, in the event that during the twelve month waiver
period ending March 31, 2010, any charterparty agreement of the group is
cancelled, any of its terms are waived or the charter rates under such
charterparty agreement decrease, in order to continue paying dividends, we must
demonstrate to the lender at the time of issuing our quarterly results that we
have the necessary cash resources to meet our future newbuild commitments,
assuming additional debt of $15.0 million per newbuild, while at all times
maintaining a minimum cash balance of $25.0 million.

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 14 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 as of late 2008. This trend in charter
hire rates 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. At the same time, the recent rapid contraction in the
world economy and the expectation of declining growth or economic decline in
the Asian region has reduced demand for drybulk services, which may continue.
Accordingly, the combination of increasing drybulk capacity (both current and
expected) and decreasing demand is likely to continue to result in reductions
in charter hire rates and, as a consequence, adversely affect our operating
results.

In response to
the adverse changes in market conditions, we have sought to strengthen our
balance sheet in view of the reduction of the availability of global credit, in
order to be in a strong position to take advantage of future opportunities when
the global economy recovers. For example, we have agreed to the early
termination of certain of our long-term time charters, in exchange for
receiving compensation from the relevant charterers (refer to Note 24(c) of our
financial statements included at the end of this annual report for more
information). As a result of the early redelivery of these vessels, our
exposure to the relatively volatile spot market (compared to the time charter
market) has increased but our counterparty risk has decreased, as the agreed
compensation represents a substantial portion of our future contracted revenue
on the time charter contracts that have been cancelled. This increased exposure
to the spot market may result in increased volatility in our operating results.
We have also reduced our capital expenditure and debt commitments through the
selective cancellation of certain of our newbuild contracts (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, 2008, we do not have any off-balance sheet arrangements.

53

---



|   |                        
|-- | -----------------------
|F. | Contractual Obligations

Our
contractual obligations as of December 31, 2008, were:

|                                 |  |                         |           |                          |   |                        |  |                        |         |                                              |   |        |  |   |         | 
|-------------------------------- |  | ----------------------- | --------- | ------------------------ | - | ---------------------- |  | ---------------------- | ------- | -------------------------------------------- | - | ------ |  | - | ------- | 
|                                 |  | Payments Due by Period  |          
|                                 |  |                         |          
|                                 |  | Total                   |           | Less than 1
 year (2009) |   | 1-3 years
 (2010-2011) |  | 3-5 years
 (2012-2013) |         | More than 5
 years (After
 January 1,
 2014) |  
|                                 |  |                         |           |                          |   |                        |  |                        |         |                                              |  
|                                 |  | (Dollars
 in thousands) |          
|Long-term
 debt obligations      |  | $                       | 468,290   |                          | $ | 54,807                 |  | $                      | 37,314  |                                              | $ | 49,012 |  | $ | 327,157 | 
|Interest
 payments (1)           |  | $                       | 105,422   |                          | $ | 19,342                 |  | $                      | 30,574  |                                              | $ | 18,779 |  | $ | 36,727  | 
|Payments to
 our manager (2) (3) |  | $                       | 53,596    |                          | $ | 7,257                  |  | $                      | 15,819  |                                              | $ | 10,572 |  | $ | 19,948  | 
|Newbuild
 contracts (3)          |  | $                       | 425,286   |                          | $ | 193,400                |  | $                      | 231,886 |                                              |   |       |  |   |        | 
|                                 |  |                         |           |                          |   |                        |  |                        |         |                                              |   |        |  |   |         | 
|Total                            |  | $                       | 1,052,594 |                          | $ | 274,806                |  | $                      | 315,593 |                                              | $ | 78,363 |  | $ | 383,832 | 
|                                 |  |                         |           |                          |   |                        |  |                        |         |                                              |   |        |  |   |         | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(1) | Amounts
 shown reflect estimated interest payments we expect to make with respect to
 our long-term debt obligations. The interest payments reflect an assumed
 LIBOR-based applicable interest rate of 1.75% for amounts outstanding in U.S.
 dollars and 2.885% for amounts outstanding in Swiss francs with respect to
 our existing credit facilities, plus the relevant margin of the applicable
 credit facility. Additionally, in calculating the interest payments we have
 used the fixed swap rates plus the applicable loan margin. See B. Liquidity
 and Capital ResourcesInterest Rate Swaps. As of March 31, 2009, none
 of the outstanding amounts under our credit facilities is denominated in
 currencies other than the U.S. dollar.                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(2) | Under our
 management agreement, from January 1, 2008 to December 31, 2008, we paid
 our Manager $575 per vessel per day for certain commercial, technical and
 administrative services, a fee of 1.0% of the gross freight, charter hire,
 ballast bonus and demurrage collected from the employment of our ships and a
 commission of 1.0% of the contract price of any vessels sold on our behalf.
 In addition, we pay our Manager a commission of 1.0% of the contract price of
 any vessels bought on our behalf (other than the Eleniand the Martine) 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. Our management agreement expires on May 28, 2018. The fees paid
 under the management agreement are fixed for the initial two year term of the
 agreement, and the amounts shown in the table above do not take into account
 any potential changes to these fees after the expiration of this initial term
 on June 3, 2010.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(3) | The table
 does not reflect the cancellation, subsequent to December 31, 2008, of
 the newbuild contracts of our subsidiaries Maxdeka and Maxenteka.
 Taking into account the cancellation of these newbuild contracts, the
 newbuild contract commitments for the 1-3 years (2010-2011) period and the
 total commitments are reduced by $89.6 million and payments to our manager
 are reduced by $0.4 million in 2009 and $1.4 million in 2010, and total
 payments to our manager and the total commitments are reduced by $1.8
 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

|        |                                           
|------- | ------------------------------------------
|ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

|   |                                
|-- | -------------------------------
|A. | Directors and Senior Management

The following
table sets forth, as of May 15, 2009, information regarding our directors
and executive officers.

|                          |  |     |  |                                                                     
|------------------------- |  | --- |  | --------------------------------------------------------------------
|Name                      |  | Age |  | Position                                                            
|                          |  |     |  |                                                                     
|                          |  |     |  |                                                                     
|Polys
 Hajioannou         |  | 42  |  | Chief
 Executive Officer, Chairman of the Board and Class I Director
|                          |  |     |  |                                                                     
|Dr. Loukas
 Barmparis     |  | 46  |  | President,
 Secretary and Class II Director                         
|                          |  |     |  |                                                                     
|Konstantinos
 Adamopoulos |  | 46  |  | Chief
 Financial Officer and Class III Director                     
|                          |  |     |  |                                                                     
|Ioannis
 Foteinos         |  | 50  |  | Chief
 Operating Officer and Class I Director                       
|                          |  |     |  |                                                                     
|Basil
 Sakellis           |  | 30  |  | Class II
 Director                                                  

54

---



|            |  |     |  |                    
|----------- |  | --- |  | -------------------
|Name        |  | Age |  | Position           
|            |  |     |  |                    
|            |  |     |  |                    
|Frank Sica  |  | 58  |  | Class III
 Director
|            |  |     |  |                    
|Ole Wikborg |  | 53  |  | Class I
 Director  

Certain
biographical information about each of these individuals is set forth below.
The term of our Class I directors expires in 2009, the term of our Class II
directors expires in 2010 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. Mr. Hajioannou is the brother of
our former Chief Operating Officer, Nicolaos Hadjioannou.

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, and is 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.

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 in business administration from the Athens School of
Economics and Business Science.

Ioannis Foteinosis
our Chief Operating Officer and a member of our board of directors since
February 2009. Mr. Foteinos has 25 years of experience in the shipping
industry. After obtaining a bachelors 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.

Basil Sakellis
has been a member of our board of directors and of our audit committee, and
corporate governance, nominating and compensation committee since 2008. Mr.
Sakellis has been an Investment Manager at HSBC Private Equity in London since
2008. Prior to that he worked at European Capital Financial Services Limited, a
private equity firm based in London, from 2006 to 2008. In 2005, Mr. Sakellis
worked for McKinsey & Company in London. From 2000 to 2004,
Mr. Sakellis worked at NM Rothschild & Sons Ltd in London.
Mr. Sakellis received an MBA. from Harvard Business School in 2006 and his
Masters in Engineering from Imperial College, University of London, in 2000.

Frank Sica
has been a member of our board of directors and the chairman of our audit
committee, and corporate governance, nominating and compensation 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
2000 to 2003, Mr. Sica was President of Soros Private Funds Management LLC,
which oversaw the direct real estate and private equity investment activities
of Soros. In 1998, Mr. Sica joined Soros Fund Management, where he was a
Managing Director responsible for Soross private equity investments. From 1988
to

55

---



1998, Mr. Sica
was a Managing Director at Morgan Stanley. In 1996, Mr. Sica was elevated to
Co-CEO of Morgan Stanleys Merchant Banking Division, whose principal operating
unit was Morgan Stanley Capital Partners. Prior to 1988, Mr. Sica was a
Managing Director in Morgan Stanleys mergers and acquisitions department. From
1974 to 1977, Mr. Sica was an officer in the U.S. Air Force. 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
MBA. Mr. Sica is also a director of CSG Systems International, an account
management and billing software company for communication industries, JetBlue
Airways Corporation, a commercial airline, NorthStar Realty Finance
Corporation, a real estate finance company, 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), and since 2006 has served as Vice President and a
member of the Executive Board of the 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 of the marine division of the Energy Zurich
Protector Insurance Company AS, based in Oslo and Zurich, and from 1993 until
1997 served as a senior underwriter for the marine division of Protector
Insurance Company AS, 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.

Nicolaos Hadjioannou
resigned as our Chief Operating Officer and as a member of our board of
directors in February 2009, and is the brother of our Chief Executive Officer,
Polys Hajioannou.

|   |                                                
|-- | -----------------------------------------------
|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. 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, non-executive independent directors
shall be paid an annual fee in the amount of $40,000 plus reimbursement for
their out-of-pocket expenses. In addition, the chairman of the audit committee
and the corporate governance, nominating and compensation 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 and the corporate governance,
nominating and compensation committee, Frank Sica, will receive the annual
equivalent of $60,000 in the form of shares of our common stock. The members of
our senior management have not and will not receive any compensation from us
other than for their services as directors. 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, 2008, 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

56

---



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, 2008, the full board of directors held two
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
Messrs. Sica, Sakellis and Wikborg are independent within the current
meanings of independence employed by the corporate governance rules of the
New York Stock Exchange and 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
and the corporate governance, nominating and compensation committee, Mr. Frank
Sica, may do so by writing to our Secretary, Dr. Loukas Barmparis, Safe
Bulkers, Inc., 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 its 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 the
Safe Bulkers website, and may be viewed at http://www.safebukers.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., 32 Avenue Karamanli,
16605, Voula, Athens, Greece.

Committees of the
Board of Directors

Audit committee

Our audit
committee consists of Ole Wikborg, Basil Sakellis 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;                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                      
| |  | 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, 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;                                                                                                                                               

57

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| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                                                       
| |   |                                                                                                                                  
| |  | 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,
Basil Sakellis and Frank Sica 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 put 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 keep 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

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 252
officers and crew members served on board the vessels we own as of
December 31, 2008, 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 not
adopted any equity compensation plans, although we have agreed to provide the
chairman of the audit committee and the corporate governance, nominating and
compensation committee, Mr. Frank Sica, as part of his remuneration, the annual
equivalent of $60,000 in the form of shares of our common stock.

58

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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 May 15, 2009, 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
May 15, 2009 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 of each stockholder is
based on 54,508,907 shares of common stock outstanding as of May 15, 2009.
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 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)                                    |  |                                           | 44,500,000 |                              |  | 81.64 | %
|                                                             |  |                                           |            |                              |  |       |  
|Officers and Directors:                                      |  |                                           |            |                              |  |       |  
|                                                             |  |                                           |            |                              |  |       |  
|Polys
 Hajioannou (2)                                        |  |                                           | 44,500,000 |                              |  | 81.64 | %
|                                                             |  |                                           |            |                              |  |       |  
|Dr. Loukas
 Barmparis                                        |  |                                           |           |                              |  |      |  
|                                                             |  |                                           |            |                              |  |       |  
|Konstantinos
 Adamopoulos                                    |  |                                           |           |                              |  |      |  
|                                                             |  |                                           |            |                              |  |       |  
|Nicolaos
 Hadjioannou (2)(3)                                 |  |                                           | 44,500,000 |                              |  | 81.64 | %
|                                                             |  |                                           |            |                              |  |       |  
|Ioannis
 Foteinos (3)                                        |  |                                           |           |                              |  |      |  
|                                                             |  |                                           |            |                              |  |       |  
|Basil
 Sakellis                                              |  |                                           |           |                              |  |      |  
|                                                             |  |                                           |            |                              |  |       |  
|Frank Sica                                                   |  |                                           | 33,907     |                              |  |       | *
|                                                             |  |                                           |            |                              |  |       |  
|Ole Wikborg                                                  |  |                                           |           |                              |  |      |  
|                                                             |  |                                           |            |                              |  |       |  
|All executive officers and directors as a
 group (7 persons) |  |                                           | 44,533,907 |                              |  | 81.70 | %

|    |                                                                                                                                                                                         | 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|    |                                                                                                                                                                                        
|*   | Less than 1%.                                                                                                                                                                          
|    |                                                                                                                                                                                        
|(1) | Vorini
 Holdings Inc. is controlled by Polys Hajioannou and Nicolaos Hadjioannou, who
 together hold the majority of our shares.                                                       
|    |                                                                                                                                                                                        
|(2) | By virtue of
 shares owned indirectly through Vorini Holdings Inc., which is our principal
 stockholder.                                                                               
|    |                                                                                                                                                                                        
|(3) | Nicolaos
 Hadjioannou resigned as our Chief Operating Officer and as a member of our
 board of directors on February 17, 2009 and was replaced in those
 positions by Ioannis Foteinos.

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

59

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major
stockholders have the same voting rights as our other stockholders. As of
May 15, 2009, we had three stockholders of record. Two of these
stockholders of record were located in the United States and held an aggregate
10,008,907 shares of common stock representing approximately 18.36% 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 10,000,000 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.

Vorini
Holdings Inc., which is controlled by Polys Hajioannou and Nicolaos
Hadjioannou, owns approximately 81.64% 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., or Machairiotissa, 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, 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

60

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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.

Reporting Structure

Our Manager
reports to us and 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, pro rated 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 receives a fee of 1.0% 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 the 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 are fixed until June 3, 2010, and are not subject to adjustment for
euro/U.S. dollar exchange rate fluctuations or deflation during that
period. After June 3, 2010, these fees will be adjusted every year by
agreement between us and our Manager.

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.

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 expires on June 3, 2010. Upon expiration of the initial term or
any renewal term, our management agreement automatically renews for one-year
periods until June 3, 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.

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;

61

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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 by the Hajioannou Entities, 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 the date immediately after the closing of this
 offering; 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
 immediately after the closing of this offering or whose nomination or
 election was previously so approved.

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 the Hajioannou Entities and
 drybulk vessel businesses that are acquired, invested in or controlled by the
 Hajioannou Entities, subject in each case to compliance with, or waivers of,
 the restrictive covenant agreements entered into between us and the
 Hajioannou Entities, described below.

Our Manager
has 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 vessel will
receive such charter.

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.

62

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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 the Hajioannou Entities 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 the Hajioannou Entities would
beneficially own less than 80% of the outstanding voting securities of the
resulting entity following such transaction.

Restrictive Covenant
Agreements

Under
restrictive covenant agreements entered into with us, Polys Hajioannou,
Nicolaos Hadjioannou and the other 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 Nicolaos Hadjioannou, the restricted period continues until one year
following the termination of his services and employment with us. Because
Nicolaos Hadjioannou resigned as our Chief Operating Officer and as a member of
our board of directors on February 17, 2009, the restricted period
with respect to him will end on February 17, 2010. In the case of the
other Hajioannou Entities the restricted period continues until one year
following the termination of the management agreement. Notwithstanding these
restrictions, Polys Hajioannou, Nicolaos Hadjioannou and the other 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;                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                     
| | (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, Nicolaos Hadjioannou and the other 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 its fair market value plus certain break-up costs.

Polys
Hajioannou, Nicolaos Hadjioannou and the other 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 addition,
Polys Hajioannou, Nicolaos Hadjioannou and the other Hajioannou Entities have
agreed that in the event of any proposed change in control of SafeFixing Corp.
(SafeFixing), we have a 15-day right of first offer to purchase SafeFixing.
SafeFixing was wholly-owned by Polys Hajioannou and Nicolaos Hadjioannou prior
to being

63

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sold to an
unaffiliated third party, and is involved in the business of chartering-in and
chartering-out of unrelated third party vessels.

For these
purposes, a proposed change in control of SafeFixing means (a) the approval of
the board of directors of SafeFixing or the stockholders of SafeFixing of a
proposed sale of all or substantially all of the assets or property of
SafeFixing, (b) the approval of SafeFixings stockholders of a proposed sale of
SafeFixingss shares that would result in one or more of Polys Hajioannou,
Nicolaos Hadjioannou and the other Hajioannou Entities, collectively, owning
less than 50.1% of the voting power of the outstanding voting securities of
SafeFixing or (c) the approval of SafeFixings stockholders of a proposed
merger, consolidation or similar transaction, as a result of which one or more
of Polys Hajioannou, Nicolaos Hadjioannou and the other Hajioannou Entities,
collectively, would beneficially own less than 50.1% of the voting power of the
outstanding voting securities of the resulting entity following such
transaction.

On
February 9, 2009, Polys Hajioannou and Nicolaos Hadjioannou offered the
Company the right to purchase SafeFixing pursuant to the terms of the
restrictive covenant agreements. This proposal was considered by a committee
comprising of the independent directors of the Company, who recommended that
the Company refuse the offer. The full board of directors of the Company
subsequently resolved to refuse the offer to purchase SafeFixing on
February 20, 2009. SafeFixing was subsequently sold to an unaffiliated
third party.

Reorganization and
Certain Related Transactions

On
May 29, 2008, the shares of various subsidiaries were contributed by Polys
Hajioannou and Nicolaos Hadjioannou to Safe Bulkers, Inc. through Vorini
Holdings Inc., a company controlled by Polys Hajioannou and Nicolaos
Hadjioannou, in exchange for the issuance of 100% of the outstanding shares of
Safe Bulkers, Inc. to Vorini Holdings Inc. (the Reorganization). Following
the Reorganization, Safe Bulkers, Inc. owned and continues to own each of the
contributed subsidiaries.

In March and
April 2008 we settled all intercompany balances as of December 31, 2007
with our Manager and with our owners. In connection with this, in January 2008,
our Manager repaid on our behalf prior owners advances in the amount of $10.1
million, resulting in a corresponding decrease in amounts due from our Manager.
In March and April 2008, we paid an aggregate dividend of $147.8 million to
Polys Hajionnou and Nicolaos Hadjioannou, our owners at that time, which was
funded from amounts due from our Manager. Finally, in order to settle the
remaining amount of $4.0 million due from our Manager, $4.0 million in
restricted cash in collateral accounts held by our Manager was transferred in
April 2008 to two new restricted cash collateral accounts of $2.0 million held
by our subsidiaries Petra and Pemer.

In addition to
the aggregate dividend of $147.8 million paid to our owners in March and April
2008, an additional dividend of $27.6 million, funded using amounts due from
our Manager and reflecting a portion of estimated net income earned from
January 1, 2008 until the date immediately prior to our initial public
offering, was also declared in May 2008 and settled through our Manager.

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.

Other Transactions

We have, in
the past, used owners advances to finance vessel acquisitions. During the
period from January 1, 2005 through December 31, 2007, we received an
aggregate of $246.0 million in net owners advances. No interest was

64

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payable with
respect to these advances, and, in respect of the same period, we had repaid
$326.2 million of such advances with funds received either from subsequent bank
debt, or from proceeds of sale of vessels where no bank debt had been obtained.

Our owners
advanced the amount of $7.7 million to our subsidiaries, Eniaprohi and
Eniadefhi, in order to fund on March 4, 2008, payments to shipyards of ¥800
million (the equivalent of $7.7 million based on the exchange rate of ¥104.15/$1.00).
We also paid, on May 27, 2008, an additional amount of ¥400 million (the
equivalent of $3.8 million based on the exchange rate of ¥105.05/$1.00)
that was advanced from our owners in relation to the Eniaprohi newbuild to the
relevant shipyard. We paid back these amounts to Vorini Holdings during 2008.

From April 9,
2008 until November 21, 2008, two cash collateral deposits of $2.0 million each
for credit facilities of our subsidiaries Petra and Pemer have been maintained
in their names, which deposits were previously maintained in the name of our
Manager on behalf of those subsidiaries.

|   |                                 
|-- | --------------------------------
|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 and $0.15 per share in
November 2008 and February 2009, respectively. We also declared a dividend of
$0.15 per share on May 6, 2009 for the shareholders of record on May 22, 2009,
payable on or about May 29, 2009.

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 and the requirements of Marshall Islands
law. The timing and amount of any dividends declared will depend on, among
other things: (a) our earnings, financial condition and cash requirements and
availability, (b) our ability to obtain debt and equity financing on acceptable
terms as contemplated by our growth strategy, (c) provisions of Marshall
Islands 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.

65

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|   |                    
|-- | -------------------
|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.

|                    |  |      |       |     |   |       | 
|------------------- |  | ---- | ----- | --- | - | ----- | 
|                    |  | High |       | Low |  
|                    |  |      |       |     |  
|                    |  |      |       |     |   |       | 
|2008
 (Annual) (1)  |  | $    | 19.05 |     | $ | 3.27  | 
|                    |  |      |       |     |   |       | 
|2008                |  |      |       |     |   |       | 
|Second
 Quarter (1) |  |      | 19.00 |     |   | 17.97 | 
|Third
 Quarter      |  |      | 19.05 |     |   | 10.90 | 
|Fourth
 Quarter     |  |      | 11.35 |     |   | 3.27  | 
|November            |  |      | 7.82  |     |   | 3.27  | 
|December            |  |      | 8.46  |     |   | 3.83  | 
|                    |  |      |       |     |   |       | 
|2009                |  |      |       |     |   |       | 
|First
 Quarter      |  |      | 8.75  |     |   | 2.81  | 
|January             |  |      | 8.75  |     |   | 6.10  | 
|February            |  |      | 7.23  |     |   | 3.65  | 
|March               |  |      | 3.58  |     |   | 2.81  | 
|April               |  |      | 4.51  |     |   | 3.17  | 

|    |                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------
|(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, 2008 and May 15, 2009, 54,501,334 and 54,508,907 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,
2008 and May 15, 2009, 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 1 to our financial statements included at the end of this annual report
for a discussion of the history of our share capital.

|   |                                       
|-- | --------------------------------------
|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
Business Corporations Act of the Marshall Islands, or the BCA. Our articles
of incorporation and bylaws do not impose any limitations on the ownership
rights of our stockholders.

66

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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 provision 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. 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;

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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
June 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 existing
stockholder 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.

68

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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 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, that 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.

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

69

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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 their 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.

70

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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 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 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 principal executive
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

71

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stockholders
ability to bring matters before an annual meeting of stockholders or to make
nominations for directors at an annual meeting of stockholders.

|   |                   
|-- | ------------------
|C. | Material Contracts

The following
is a summary of each material contract that we have entered into outside the
ordinary course of business during the two year period immediately preceding
the date of this annual report. Such summaries are not intended to be complete
and reference is made to the contracts themselves, which are exhibits to this
annual report.

| |     |                                                                                                                                                                                                                                                                                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Management
 Agreement, dated May 29, 2008, between Safety Management Overseas S.A.
 and Safe Bulkers, Inc. For a description of the Management Agreement, please
 see Item 7. Major Shareholders and Related Party TransactionsB. Related
 Party TransactionsManagement Agreement.                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                              
| | (b) | Restrictive
 Covenant Agreement, dated May 29, 2008, between Safe Bulkers, Inc.
 Vorini Holdings Polys Hajioannou, SafeFixing Corporation and Machairiotissa
 Holdings Inc. For a description of this Restrictive Covenant Agreement,
 please see Item 7. Major Shareholders and Related Party TransactionsB.
 Related Party TransactionsRestrictive Covenant Agreements.
| |     |                                                                                                                                                                                                                                                                                                                                                                              
| | (c) | Restrictive
 Covenant Agreement, dated May 29, 2008, between Safe Bulkers, Inc. and
 Polys Hajioannou. For a description of this Restrictive Covenant Agreement,
 please see Item 7. Major Shareholders and Related Party TransactionsB.
 Related Party TransactionsRestrictive Covenant Agreements.                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                              
| | (d) | Restrictive
 Covenant Agreement, dated May 29, 2008, between Safe Bulkers, Inc. and
 Nicolaos Hadjioannou. For a description of this Restrictive Covenant
 Agreement, please see Item 7. Major Shareholders and Related Party
 TransactionsB. Related Party TransactionsRestrictive Covenant Agreements.                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                              
| | (e) | Stockholder
 Rights Agreement, dated May 14, 2008, between Safe Bulkers, Inc. and
 American Stock Transfer & Trust Company, as Rights Agent. For a
 description of the Stockholder Rights Agreement, please see Item 10.
 Additional InformationB. Memorandum and Articles of AssociationStockholder
 Rights Plan.                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                              
| | (f) | Registration
 Rights Agreement, dated May 14, 2008, between Safe Bulkers, Inc. and
 Vorini Holdings. For a description of the Registration Rights Agreement,
 please see Item 7. Major Shareholders and Related Party TransactionsB.
 Related Party TransactionsRegistration Rights Agreement.                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                              
| | (g) | Credit
 Facilities. For a description of our credit facilities please see Note 8
 to our financial statements at the end of this annual report.                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                              
| | (h) | Shipbuilding
 Contract, dated December 6, 2006, between Eptaprohi Shipping Corporation and
 Jiangsu Rongsheng Heavy Industries Group Co., Ltd for the construction and
 purchase of HN1074. For a
 description of other key details relating to this contract, please see
 Item 4. Information on the CompanyB. Business OverviewOur Fleet and
 Newbuilds.               
| |     |                                                                                                                                                                                                                                                                                                                                                                              
| | (i) | Shipbuilding
 Contract, dated December 6, 2006, between Maxpente Shipping Corporation and
 Jiangsu Rongsheng Heavy Industries Group Co., Ltd for the construction and
 purchase of HN1075. For a
 description of other key details relating to this contract, please see
 Item 4. Information on the CompanyB. Business OverviewOur Fleet and
 Newbuilds.                
| |     |                                                                                                                                                                                                                                                                                                                                                                              
| | (j) | Memorandum
of Agreement, dated October 26, 2007, between Songa Shipping Pte Ltd. and Maxdodeka
Shipping Corporation for the construction and purchase of HN1039. For a description of other key details relating to this contract,
please see Item 4. Information on the CompanyB. Business OverviewOur
Fleet and Newbuilds.                                             

72

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|                                                                                                                                                                                                                                                                             |                                                                    |                                                                                                                                                                                                                                                                                                                                     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                             | (k)                                                                | Memorandum
of Agreement, dated October 26, 2007, between Songa Shipping Pte Ltd. and
Maxdekatria Shipping Corporation for the construction and purchase
of HN1050. For a description of other key details relating to this contract, please
see Item 4. Information on the CompanyB. Business OverviewOur Fleet
and Newbuilds.  
|                                                                                                                                                                                                                                                                             |                                                                    |                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                             | (l)                                                                | Memorandum
of Agreement, dated July 4, 2008, between Cosmos World Maritime S.A. and Shikoku
Friendship Shipping Company for the construction and purchase of HN1579. For a description of other key details relating to this contract,
please see Item 4. Information on the CompanyB. Business OverviewOur
Fleet and Newbuilds.
|                                                                                                                                                                                                                                                                             |                                                                    |                                                                                                                                                                                                                                                                                                                                     
|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, or the
New Act. 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%.

73

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United States
Federal Income Tax Considerations

The following
discussion of U.S. federal income tax matters is based on the Internal Revenue
Code of 1986, or 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

Subject to the
discussion of effectively connected income below, 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 gross
U.S. source shipping income (without the allowance for deductions).

For this
purpose, shipping income means income that is derived 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.                                                                                                                                      

For this
purpose, 50% of the shipping income that is attributable to transportation that
begins or ends (but that does not both begin and end) in the United States
constitutes U.S. source shipping income. Shipping income attributable to
transportation that both begins and ends in the United States is generally
considered to be 100% U.S. source shipping income. Although there can be
no assurance, we do not expect to engage in transportation that produces income
that is considered to be 100% U.S. source shipping income. Shipping income
attributable to transportation exclusively between non-U.S. ports is
generally considered to be 100% non-U.S. source shipping income, which is
not subject to any U.S. income tax.

Under
Section 883 of the Code, a non-U.S. corporation will be exempt from
U.S. income tax on its U.S. source shipping 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 our source
shipping income. Since we expect that no more than 50% of our shipping income
would be treated as U.S. source shipping income, we expect that the
maximum effective rate of U.S. income tax on our gross shipping income
would not exceed 2%. Many of our charters contain a provision that obligates
the charterer to reimburse us for the 4% U.S. income tax we are required
to pay in respect of the vessel that is subject to the relevant charter.

74

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Since the
exemption of Section 883 of the Code will not apply to us, our
U.S. source shipping 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.

Our
U.S. source shipping income would be considered effectively connected
with the conduct of a U.S. trade or business only if:

| |     |                                                                                                                                                                                                                                                                                                              
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | we had, or
 were considered to have, a fixed place of business in the United States
 involved in the earning of U.S. source shipping income; and                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                              
| | (b) | substantially
 all of our U.S. source shipping 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 have, or permit circumstances that would result in having, any
vessel sailing to or from the United States on a regularly scheduled basis.
Based on the foregoing and on the expected mode of our shipping operations and
other activities, we expect that none of our U.S. shipping income will be
effectively connected with the conduct of a U.S. trade or business.

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.

Taxation of United
States 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.

75

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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 which 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).                     

76

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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

77

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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.

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.                                                                                                                                                                                                 

78

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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.

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. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

79

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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, through our
subsidiaries, have floating rate debt outstanding, which is based on U. S.
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 11
interest rate swap agreements as of December 31, 2008, compared to one
interest rate swap agreement as of December 31, 2007, 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, 2008 was
$445.2 million. The swaps have specified rates and durations. Refer to the
table in Note 14 of our financial statements included at the end of this annual
report which summarizes the interest rate swaps in place as of December 31,
2008 and December 31, 2007.

Under our
interest rate swap transactions, the bank effects quarterly or semi-annual
floating-rate payments to us for the relevant amount based either on the three-
or six month U.S. LIBOR and we make quarterly or semi-annual 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
Statement of Financial Accounting Standards 133. 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 95% of
our loans outstanding as of December 31, 2008. On March 30, 2009, we
entered into one additional interest rate swap transaction in relation to one
of our credit facilities. As of March 31, 2009, there was only one credit
facility out of 13 in respect of which we had not entered into derivative
financial instruments to mitigate the interest rate risk (refer to
Note 24(d) of our financial statements at the end of this annual report). As a result of our interest rate swap
transactions, a hypothetical 100 basis point increase in the prevailing U.S.
LIBOR would not have a material
effect on our interest cost.

Foreign Currency
Exchange Risk

We generate
all of our revenues in U.S. dollars, but for the year ended December 31, 2008
we incurred approximately 24.7% of our vessel operating expenses in currencies
other than the U.S. dollar. As of December 31, 2008, approximately 28.3% of our
outstanding accounts payable were denominated in currencies other than the U.S.
dollar. Our borrowings and outstanding accounts payable denominated in foreign
currencies are subject to exchange rate risk and 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, 2008, would have increased the fair value of
our borrowings by approximately 0.3% and the U.S. dollar equivalent of
outstanding indebtedness by $1.3 million and would have increased the fair
value of our accounts payable by approximately $44,543. As of March 31,
2009, all of our debt outstanding under our credit facilities was denominated
in U.S. dollars.

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.

|         |                                                       
|-------- | ------------------------------------------------------
|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not
applicable.

80

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PART II

|         |                                                
|-------- | -----------------------------------------------
|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Please see
Item 5Operating and
Financial Review and ProspectsB. Liquidity and
Capital Resources.

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

|   |                
|-- | ---------------
|A. | Use of Proceeds

We adopted a
stockholder rights plan on May 14, 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.

Our
registration statement on Form F-1 (Reg. No. 333-150995) relating to our
initial public offering of 10,000,000 shares of common stock was declared
effective by the SEC on May 28, 2008 and the offering commenced on that date.
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse
Securities (USA) LLC served as joint bookrunning managers of the offering and
as representatives of the several underwriters. The shares of common stock were
sold at a public offering price of $19.00 for gross offering proceeds of
$190,000,000. The discount to the underwriters was $1.235 per common share for
a total underwriting discount of $12,350,000 and we incurred other expenses
(including filing, legal and accounting fees) of approximately $4.8 million, none
of which were paid to our directors, officers or their affiliates or to persons
owning 10% or more of any class of our capital stock. We did not receive any of
the proceeds from the sale of the shares of common stock by the selling
shareholder, Vorini Holdings Inc.

|         |                        
|-------- | -----------------------
|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 Securities Exchange Act of 1934, as of December 31,
2008. 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 Securities Exchange Act of 1934 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
Securities Exchange Act of 1934 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, 2008.

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

This annual
report does not include a report of managements assessment regarding internal
control over financial reporting or an attestation report of our companys
registered public accounting firm due to a transition period established by
rules of the Securities and Exchange Commission for newly public
companies.

81

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|   |                                                                         
|-- | ------------------------------------------------------------------------
|C. | Attestation Report of the Independent Registered Public Accounting
 Firm

Not
applicable. Refer to Item 15. Controls and Procedures - B. Managements
Annual Report on Internal Control Over Financial Reporting.

|   |                                                     
|-- | ----------------------------------------------------
|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.

|          |                                 
|--------- | --------------------------------
|ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT

Our Audit
Committee consists of three independent directors, Basil Sakellis, 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, 2008.

|          |                                       
|--------- | --------------------------------------
|ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES

Deloitte,
Hadjipavlou, Sofianos & Cambanis S.A., an independent registered public
accounting firm and member of Deloitte Touche Tohmatsu, has audited our annual
financial statements acting as our independent auditor for the fiscal years
ended December 31, 2006, 2007 and 2008.

The chart
below sets forth the total amount billed and accrued for the Deloitte,
Hadjipavlou, Sofianos & Cambanis S.A. services performed in 2007 and 2008
and breaks down these amounts by the category of service.

|                    |  |      |       |      |   |     | 
|------------------- |  | ---- | ----- | ---- | - | --- | 
|(In Thousands)      |  | 2007 |       | 2008 |  
|                    |  |      |       |      |  
|                    |  |      |       |      |   |     | 
|Audit fees          |  | $    | 1,199 |      | $ | 872 | 
|Audit-related
 fees |  |      |      |      |   |    | 
|Tax fees            |  |      |      |      |   |    | 
|All other
 fees     |  |      |      |      |   |    | 
|Total fees          |  | $    | 1,199 |      | $ | 872 | 

Audit Fees

Audit fees paid to Deloitte
Hadjipavlou, Sofianos and Cambanis S.A. in respect of 2007 comprised
compensation for professional services rendered for the audit of the combined
financial statements of the predecessor business of the Company for the years
ended December 31, 2005 and 2006 and the review of the interim financial
information for the six months ended June 30, 2007, including fees in
connection with our confidential submission of the Registration
Statement on Form F-1 related to our initial public offering.

Audit fees paid to Deloitte
Hadjipavlou, Sofianos and Cambanis S.A. in respect of 2008 comprised
compensation for professional services rendered for the audit of the combined
and consolidated financial statements of the Company for the years ended
December 31, 2007 and 2008 and for the review of the quarterly financial
information

82

---



in 2008 as well as in
connection with the review of the Registration Statement on Form F-1 (Reg. No.
333-150995), which we filed with the SEC in the first half of 2008.

Audit-related Fees

Not
applicable.

Tax Fees

Not
applicable.

Other Fees

Not
applicable.

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.

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

Not
Applicable.

|          |                                             
|--------- | --------------------------------------------
|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.

83

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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 NYSE 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.

84

---



PART III

|         |                     
|-------- | --------------------
|ITEM 17. | FINANCIAL STATEMENTS

Not Applicable.

|         |                     
|-------- | --------------------
|ITEM 18. | FINANCIAL STATEMENTS

Reference is
made to pages F-1 through F-33 included herein by reference.

|         |         
|-------- | --------
|ITEM 19. | EXHIBITS

|                |  |                                                                                                                                                                                                      
|--------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
 Number |  | Description                                                                                                                                                                                          
|                |  |                                                                                                                                                                                                      
|1.1             |  | Amended and
 Restated Articles of Incorporation*                                                                                                                                                     
|                |  |                                                                                                                                                                                                      
|1.2             |  | 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             |  | Form of
 Restrictive Covenant Agreement between Safe Bulkers, Inc. and Nicolaos
 Hadjioannou*                                                                                                        
|                |  |                                                                                                                                                                                                      
|4.5             |  | Form of
 Contribution, Conveyance and Assumption Agreement between Safe Bulkers, Inc.,
 Vorini Holdings, Inc., Polys Hajioannou and Nicolaos Hadjioannou*                                            
|                |  |                                                                                                                                                                                                      
|4.6             |  | Loan
 Agreement, dated February 16, 2005, to Marathassa Shipping Corporation
 provided by The Royal Bank of Scotland plc*                                                                            
|                |  |                                                                                                                                                                                                      
|4.7             |  | Letter Agreement,
 dated April 19, 2006, Amending Loan Agreement, dated February 16, 2005, to
 Marathassa Shipping Corporation provided by The Royal Bank of Scotland plc*                           
|                |  |                                                                                                                                                                                                      
|4.8             |  | Letter
 Agreement, dated May 14, 2008, Amending Loan Agreement, dated February 16,
 2005, to Marathassa Shipping Corporation provided by The Royal Bank of
 Scotland plc*                            
|                |  |                                                                                                                                                                                                      
|4.9             |  | Supplemental
 Agreement, dated May 23, 2008, Amending Loan Agreement, dated February 16,
 2005, to Marathassa Shipping Corporation provided by The Royal Bank of
 Scotland plc*                      
|                |  |                                                                                                                                                                                                      
|4.10            |  | Corporate
 Guarantee, dated May 23, 2008, of Safe Bulkers, Inc. relating to Loan
 Agreement, dated February 16, 2005, to Marathassa Shipping Corporation
 provided by The Royal Bank of Scotland plc*
|                |  |                                                                                                                                                                                                      
|4.11            |  | Supplemental
 Agreement, dated April 6, 2009 Amending Loan Agreement, dated February 16,
 2005, to Marathassa Shipping Corporation provided by The Royal Bank of
 Scotland plc                       
|                |  |                                                                                                                                                                                                      
|4.12            |  | Loan
 Agreement, dated March 1, 2006, to Marinouki Shipping Corporation provided by
 The                                                                                                             

85

---



|     |  |                                                                                                                                                                                                                 
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | Royal Bank
 of Scotland plc*                                                                                                                                                                                    
|     |  |                                                                                                                                                                                                                 
|4.13 |  | Letter
 Agreement, dated March 10, 2008, Amending Loan Agreement, dated March 1,
 2006, to Marinouki Shipping Corporation provided by The Royal Bank of
 Scotland plc*                                          
|     |  |                                                                                                                                                                                                                 
|4.14 |  | Supplemental
 Letter Agreement, dated April 24, 2008, Amending Loan Agreement, dated March
 1, 2006, to Marinouki Shipping Corporation provided by The Royal Bank of
 Scotland plc*                             
|     |  |                                                                                                                                                                                                                 
|4.15 |  | Letter
 Agreement, dated May 14, 2008, Amending Loan Agreement, dated March 1, 2006,
 to Marinouki Shipping Corporation provided by The Royal Bank of Scotland plc*                                             
|     |  |                                                                                                                                                                                                                 
|4.16 |  | Supplemental
 Agreement, dated May 23, 2008, Amending Loan Agreement, dated March 1, 2006,
 to Marinouki Shipping Corporation provided by The Royal Bank of Scotland plc*                                       
|     |  |                                                                                                                                                                                                                 
|4.17 |  | Corporate
 Guarantee, dated May 23, 2008, of Safe Bulkers, Inc. relating to Loan
 Agreement, dated March 1, 2006, to Marinouki Shipping Corporation provided by
 The Royal Bank of Scotland plc*                
|     |  |                                                                                                                                                                                                                 
|4.18 |  | Supplemental
 Agreement, dated April 6, 2009, Amending Loan Agreement, dated March 1, 2006,
 to Marinouki Shipping Corporation provided by The Royal Bank of Scotland plc                                       
|     |  |                                                                                                                                                                                                                 
|4.19 |  | Loan
 Agreement, dated June 30, 2008, to Staloudi Shipping Corporation provided by
 Deutsche Schiffsbank Aktiengesellschaft                                                                                     
|     |  |                                                                                                                                                                                                                 
|4.20 |  | Guarantee
 and Indemnity, dated June 30, 2008, of Safe Bulkers, Inc. relating to Loan
 Agreement dated June 30, 2008, to Staloudi Shipping corporation provided by
 Deutsche Schiffsbank Aktiengesellschaft     
|     |  |                                                                                                                                                                                                                 
|4.21 |  | Loan
 Agreement dated January 11, 2007, to Petra Shipping Ltd provided by
 Bayerische Hypo-Und Verinsbank Aktiengesellschaft*                                                                                   
|     |  |                                                                                                                                                                                                                 
|4.22 |  | Letter
 Agreement, dated January 18, 2008, Amending Loan Agreement, dated January 11,
 2007, to Petra Shipping Ltd provided by Bayerische Hypo- Und Vereinsbank
 Aktiengesellschaft*                            
|     |  |                                                                                                                                                                                                                 
|4.23 |  | Supplemental
 Letter Agreement, dated May 14, 2008, Amending Loan Agreement, dated January
 11, 2007, to Petra Shipping Ltd provided by Bayerische Hypo- Und Vereinsbank
 Aktiengesellschaft*                   
|     |  |                                                                                                                                                                                                                 
|4.24 |  | Supplemental
 Letter Agreement, dated May 15, 2008, Amending Loan Agreement, dated January
 11, 2007, to Petra Shipping Ltd provided by Bayerische Hypo- Und Vereinsbank
 Aktiengesellschaft*                   
|     |  |                                                                                                                                                                                                                 
|4.25 |  | Supplemental
 Agreement, dated November 20, 2008, relating to Loan Agreement, dated January
 11, 2007, to Petra Shipping Ltd provided by Bayerische Hypo- Und Vereinsbank
 Aktiengesellschaft                   
|     |  |                                                                                                                                                                                                                 
|4.26 |  | Corporate
 Guarantee, dated November 20, 2008, of Safe Bulkers, Inc. relating to Loan
 Agreement, dated January 11, 2007, to Petra Shipping Ltd provided by
 Bayerische Hypo- Und Vereinsbank Aktiengesellschaft
|     |  |                                                                                                                                                                                                                 
|4.27 |  | Loan
 Agreement, dated March 7, 2007, to Pemer Shipping Ltd provided by Bayerische
 Hypo-Und Vereinsbank Aktiengesellschaft*                                                                                    
|     |  |                                                                                                                                                                                                                 
|4.28 |  | Letter
 Agreement, dated March 5, 2008, Amending Loan Agreement, dated March 7, 2007,
 to Pemer Shipping Ltd provided by Bayerische Hypo- Und Vereinsbank
 Aktiengesellschaft*                                  
|     |  |                                                                                                                                                                                                                 
|4.29 |  | Supplemental
 Letter Agreement, dated May 14, 2008, Amending Loan Agreement, dated March 7,
 2007, to Pemer Shipping Ltd provided by Bayerische Hypo- Und Vereinsbank                                           

86

---



|     |  |                                                                                                                                                                                                             
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | Aktiengesellschaft*                                                                                                                                                                                         
|     |  |                                                                                                                                                                                                             
|4.30 |  | Supplemental
 Letter Agreement, dated May 15, 2008, Amending Loan Agreement, dated March 7,
 2007, to Pemer Shipping Ltd provided by Bayerische Hypo- Und Vereinsbank
 Aktiengesellschaft*                  
|     |  |                                                                                                                                                                                                             
|4.31 |  | Supplemental
 Agreement, dated November 20, 2008, relating to Loan Agreement, dated March
 7, 2007, to Pemer Shipping Ltd provided by Bayerische Hypo- Und Vereinsbank
 Aktiengesellschaft                  
|     |  |                                                                                                                                                                                                             
|4.32 |  | Corporate
 Guarantee, dated November 20, 2008, of Safe Bulkers, Inc. relating to loan
 Agreement dated March 7, 2007, to Pemer Shipping Ltd provided by Bayerische
 Hypo- Und Vereinsbank Aktiengesellschaft
|     |  |                                                                                                                                                                                                             
|4.33 |  | Loan
 Agreement, dated June 12, 2007, to Pelea Shipping Ltd provided by DnB NOR
 BANK ASA*                                                                                                                  
|     |  |                                                                                                                                                                                                             
|4.34 |  | First
 Supplemental Agreement, dated May 22, 2008, Amending Loan Agreement, dated
 June 12, 2007, to Pelea Shipping Ltd provided by DnB NOR BANK ASA*                                                       
|     |  |                                                                                                                                                                                                             
|4.35 |  | Guarantee
 and Indemnity of Safe Bulkers, Inc., dated 2008, relating to Loan Agreement,
 dated June 12, 2007, to Pelea Shipping Ltd provided by DnB NOR BANK ASA                                            
|     |  |                                                                                                                                                                                                             
|4.36 |  | Second
 Supplemental Agreement, dated September 25, 2008, Amending Loan Agreement,
 dated June 12, 2007, to Pelea Shipping Ltd provided by DnB NOR BANK ASA                                                 
|     |  |                                                                                                                                                                                                             
|4.37 |  | Third
 Supplemental Agreement, dated March 31, 2009, Amending Loan Agreement, dated
 June 12, 2007, to Pelea Shipping Ltd provided by DnB NOR BANK ASA                                                      
|     |  |                                                                                                                                                                                                             
|4.38 |  | Loan
 Agreement, dated November 19, 2007, to Soffive Shipping Corporation provided
 by The Royal Bank of Scotland plc*                                                                                      
|     |  |                                                                                                                                                                                                             
|4.39 |  | Letter
 Agreement, dated May 14, 2008, Amending Loan Agreement, dated November 19,
 2007, to Soffive Shipping Corporation provided by The Royal Bank of Scotland
 plc*                                      
|     |  |                                                                                                                                                                                                             
|4.40 |  | Supplemental
 Agreement, dated May 23, 2008, Amending Loan Agreement, dated November 19,
 2007, to Soffive Shipping Corporation provided by The Royal Bank of Scotland
 plc*                                
|     |  |                                                                                                                                                                                                             
|4.41 |  | Corporate
 Guarantee, dated May 23, 2008, of Safe Bulkers, Inc. relating to Loan
 Agreement, dated November 18, 2007, to Soffive Shipping Corporation provided
 by The Royal Bank of Scotland plc*          
|     |  |                                                                                                                                                                                                             
|4.42 |  | Supplemental
 Agreement, dated April 6, 2009, Amending Loan Agreement, dated November 19,
 2007, to Soffive Shipping Corporation provided by The Royal Bank of Scotland
 plc                                
|     |  |                                                                                                                                                                                                             
|4.43 |  | Loan
 Agreement, dated December 13, 2007, to Kerasies Shipping Corporation provided
 by The Royal Bank of Scotland plc*                                                                                     
|     |  |                                                                                                                                                                                                             
|4.44 |  | Letter
 Agreement, dated May 14, 2008, Amending Loan Agreement, dated December 13,
 2007, to Kerasies Shipping Corporation provided by The Royal Bank of Scotland
 plc*                                     
|     |  |                                                                                                                                                                                                             
|4.45 |  | Supplemental
 Agreement, dated May 23, 2008, Amending Loan Agreement, dated December 13,
 2007, to Kerasies Shipping Corporation provided by The Royal Bank of Scotland
 plc*                               
|     |  |                                                                                                                                                                                                             
|4.46 |  | Corporate
 Guarantee, dated May 23, 2008, of Safe Bulkers, Inc. relating to Loan
 Agreement, dated December 13, 2007, to Kerasies Shipping Corporation provided
 by The Royal Bank of Scotland plc*         

87

---



|     |  |                                                                                                                                                                                                 
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.47 |  | Supplemental
 Agreement, dated April 6, 2009, Amending Loan Agreement, dated December 13, 2007,
 to Kerasies Shipping Corporation provided by The Royal Bank of Scotland plc                    
|     |  |                                                                                                                                                                                                 
|4.48 |  | Loan
 Agreement, dated January 11, 2008, to Marindou Shipping Corporation provided
 by DnB NOR Bank ASA*                                                                                        
|     |  |                                                                                                                                                                                                 
|4.49 |  | First
 Supplemental Agreement, dated May 22, 2008, Amending Loan Agreement, dated
 January 11, 2008, to Marindou Shipping Corporation provided by DnB NOR BANK
 ASA*                            
|     |  |                                                                                                                                                                                                 
|4.50 |  | Guarantee
 and Indemnity of Safe Bulkers, Inc., dated 2008, relating to Loan Agreement,
 dated January 11, 2008, to Marindou Shipping Corporation provided by DnB NOR
 BANK ASA                 
|     |  |                                                                                                                                                                                                 
|4.51 |  | Second
 Supplemental Agreement, dated March 31, 2009, Amending Loan Agreement, dated
 January 11, 2008, to Marindou Shipping Corporation provided by DnB NOR BANK
 ASA                          
|     |  |                                                                                                                                                                                                 
|4.52 |  | Loan
 Agreement, dated January 11, 2008, to Efragel Shipping Corporation provided
 by DnB NOR Bank ASA*                                                                                         
|     |  |                                                                                                                                                                                                 
|4.53 |  | First
 Supplemental Agreement, dated May 22, 2008, Amending Loan Agreement, dated
 January 11, 2008, to Efragel Shipping Corporation provided by DnB NOR BANK
 ASA*                             
|     |  |                                                                                                                                                                                                 
|4.54 |  | Guarantee
 and Indemnity of Safe Bulkers, Inc., dated 2008, relating to Loan Agreement,
 dated January 11, 2008, to Efragel Shipping Corporation provided by DnB NOR
 BANK ASA                  
|     |  |                                                                                                                                                                                                 
|4.55 |  | Second
 Supplemental Agreement, dated March 31, 2009, Amending Loan Agreement, dated
 January 11, 2008, to Efragel Shipping Corporation provided by DnB NOR BANK
 ASA                           
|     |  |                                                                                                                                                                                                 
|4.56 |  | Loan
 Agreement, dated April 17, 2008, to Avstes Shipping Corporation provided by
 DnB NOR Bank ASA*                                                                                            
|     |  |                                                                                                                                                                                                 
|4.57 |  | First
 Supplemental Agreement, dated May 22, 2008, Amending Loan Agreement, dated
 April 17, 2008, to Avstes Shipping Corporation provided by DnB NOR BANK ASA*                                 
|     |  |                                                                                                                                                                                                 
|4.58 |  | Guarantee
 and Indemnity of Safe Bulkers, Inc., dated June 3, 2008, relating to Loan
 Agreement, dated April 7, 2008, to Avstes Shipping Corporation provided by
 DnB NOR BANK ASA              
|     |  |                                                                                                                                                                                                 
|4.59 |  | Second
 Supplemental Agreement, dated March 31, 2009, Amending Loan Agreement, dated
 April 17, 2008, to Avstes Shipping Corporation provided by DnB NOR BANK ASA                               
|     |  |                                                                                                                                                                                                 
|4.60 |  | Loan
 Agreement, dated September 25, 2008, to Eniadefhi Shipping Corporation
 provided by DnB NOR BANK ASA                                                                                      
|     |  |                                                                                                                                                                                                 
|4.61 |  | Guarantee
 and Indemnity of Safe Bulkers, Inc., dated September 25, 2008, relating to
 Loan Agreement, dated September 25, 2008, to Eniadefhi Shipping Corporation
 provided by DnB NOR BANK ASA
|     |  |                                                                                                                                                                                                 
|4.62 |  | First
 Supplemental Agreement, dated March 31, 2009, Amending Loan Agreement, dated
 September 25, 2008, to Eniadefhi Shipping Corporation provided by DnB NOR
 BANK ASA                        
|     |  |                                                                                                                                                                                                 
|4.63 |  | Loan
 Agreement, dated September 25, 2008, to Eniaprohi Shipping Corporation
 provided by DnBNOR BANK ASA                                                                                       
|     |  |                                                                                                                                                                                                 
|4.64 |  | Guarantee
 and Indemnity of Safe Bulkers, Inc., dated September 25, 2008, relating to
 Loan Agreement, dated September 25, 2008, to Eniaprohi Shipping Corporation
 provided by DnB NOR BANK ASA
|     |  |                                                                                                                                                                                                 
|4.65 |  | First
 Supplemental Agreement, dated March 31, 2009, Amending Loan Agreement, dated                                                                                                             

88

---



|     |  |                                                                                                                                                                                                                    
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | September
 25, 2008, to Eniaprohi Shipping Corporation provided by DnB NOR BANK ASA                                                                                                                                
|     |  |                                                                                                                                                                                                                    
|4.66 |  | Shipbuilding
 Contract, dated December 6, 2006, with Jiangsu Rongsheng Heavy Industries
 Group Co., Ltd for HN1074*                                                                                                
|     |  |                                                                                                                                                                                                                    
|4.67 |  | Shipbuilding
 Contract, dated December 6, 2006, with Jiangsu Rongsheng Heavy Industries
 Group Co., Ltd for HN1075*                                                                                                
|     |  |                                                                                                                                                                                                                    
|4.68 |  | Memorandum
 of Agreement, dated October 26, 2007, for the HN 1039*                                                                                                                                                 
|     |  |                                                                                                                                                                                                                    
|4.69 |  | Memorandum
 of Agreement, dated October 26, 2007, for the HN 1050*                                                                                                                                                 
|     |  |                                                                                                                                                                                                                    
|4.70 |  | Memorandum
 of Agreement, dated July 4, 2008, for the HN 1579                                                                                                                                                      
|     |  |                                                                                                                                                                                                                    
|8.1  |  | List of
 Subsidiaries                                                                                                                                                                                              
|     |  |                                                                                                                                                                                                                    
|12.1 |  | Certification
 of principal executive officer pursuant to Rule 13a-14(a) of the Securities
 Exchange Act of 1934, as amended                                                                                       
|     |  |                                                                                                                                                                                                                    
|12.2 |  | Certification
 of principal financial officer pursuant to Rule 13a-14(a) of the Securities
 Exchange Act of 1934, as amended                                                                                       
|     |  |                                                                                                                                                                                                                    
|13.1 |  | Certification
 of principal executive officer pursuant to Rule 13a-14(b) of the Securities
 Exchange Act of 1934, as amended, and 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 Rule 13a-14(b) of the Securities
 Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350 as added by
 Section 906 of the Sarbanes-Oxley Act of 2002

|  |                                                                                                                                                                                                    
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|* | 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.

89

---



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.

May 18, 2009

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

90

---



INDEX TO FINANCIAL
STATEMENTS

|                                                                                                                   |  |     
|------------------------------------------------------------------------------------------------------------------ |  | ----
|                                                                                                                   |  | Page
|                                                                                                                   |  |     
|                                                                                                                   |  |     
|Report of Independent Registered Public
 Accounting Firm                                                           |  | F-2 
|                                                                                                                   |  |     
|Consolidated Balance Sheets as of
 December 31, 2007 and 2008                                                      |  | F-3 
|                                                                                                                   |  |     
|Combined and Consolidated Statements of
 Income for the years ended December 31, 2006, 2007 and 2008               |  | F-5 
|                                                                                                                   |  |     
|Combined and Consolidated Statements of
 Shareholders Equity for the years ended December 31, 2006, 2007 and 2008 |  | F-6 
|                                                                                                                   |  |     
|Combined and Consolidated Statements of
 Cash Flows for the years ended December 31, 2006, 2007 and 2008           |  | F-7 
|                                                                                                                   |  |     
|Notes to Combined and Consolidated
 Financial Statements                                                           |  | F-8 

F-1

---



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 accompanying consolidated balance sheets of Safe Bulkers, Inc. and
subsidiaries and related companies, as of December 31, 2007 and 2008, and the
related combined and consolidated statements of income, shareholders equity,
and cash flows for each of the three years in the period ended December 31,
2008. The combined and consolidated financial statements include the accounts
of Safe Bulkers, Inc. and its subsidiaries and the five Additional Companies
defined in Note 1 to the accompanying financial statements (hereafter
collectively referred to as the Company). These Additional Companies were
under common ownership and management. 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. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 combined and consolidated financial statements present fairly, in
all material respects, the financial position of Safe Bulkers Inc. and its
subsidiaries and the Additional Companies as of December 31, 2007 and 2008, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2008, in conformity with accounting
principles generally accepted in the United States of America.

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

Athens, Greece
May 18, 2009

F-2

---



SAFE BULKERS, INC. 
CONSOLIDATED BALANCE SHEETS 
DECEMBER 31, 2007 AND 2008 
(In thousands of U.S. Dollars, except for share and per share data)

|                                                                |  |              |    |      |  |         |  |  |         | 
|--------------------------------------------------------------- |  | ------------ | -- | ---- |  | ------- |  |  | ------- | 
|                                                                |  | December
 31 |   
|                                                                |  |              |   
|                                                                |  | Notes        |    | 2007 |  | 2008    | 
|                                                                |  |              |    |      |  |         | 
|ASSETS                                                          |  |              |    |      |  |         |  |  |         | 
|CURRENT ASSETS:                                                 |  |              |    |      |  |         |  |  |         | 
|Cash and cash equivalents                                       |  |              |    |      |  |        |  |  | 27,702  | 
|Time deposits  short term                                      |  |              |    |      |  |        |  |  | 21,274  | 
|Accounts receivable trade, net                                  |  |              |    |      |  | 1,717   |  |  | 528     | 
|Due from Manager                                                |  |              | 3  |      |  | 96,370  |  |  | 112     | 
|Inventories                                                     |  |              |    |      |  | 792     |  |  | 1,189   | 
|Accrued revenue                                                 |  |              | 19 |      |  |        |  |  | 3,938   | 
|Restricted cash                                                 |  |              |    |      |  |        |  |  | 32,629  | 
|Prepaid expenses and other current assets                       |  |              |    |      |  | 4       |  |  | 714     | 
|Total current assets                                            |  |              |    |      |  | 98,883  |  |  | 88,086  | 
|                                                                |  |              |    |      |  |         |  |  |         | 
|FIXED ASSETS:                                                   |  |              |    |      |  |         |  |  |         | 
|Vessels, net                                                    |  |              | 4  |      |  | 254,817 |  |  | 286,955 | 
|Advances for vessel acquisition and vessels
 under construction |  |              | 5  |      |  | 53,272  |  |  | 100,194 | 
|Other fixed assets, net                                         |  |              | 6  |      |  | 251     |  |  | 147     | 
|Total fixed assets                                              |  |              |    |      |  | 308,340 |  |  | 387,296 | 
|                                                                |  |              |    |      |  |         |  |  |         | 
|OTHER NON CURRENT ASSETS:                                       |  |              |    |      |  |         |  |  |         | 
|Deferred finance charges, net                                   |  |              | 7  |      |  | 434     |  |  | 773     | 
|Restricted cash                                                 |  |              |    |      |  |        |  |  | 4,750   | 
|Derivative assets                                               |  |              | 14 |      |  |        |  |  | 1,377   | 
|Total assets                                                    |  |              |    |      |  | 407,657 |  |  | 482,282 | 
|                                                                |  |              |    |      |  |         |  |  |         | 
|LIABILITIES AND SHAREHOLDERS EQUITY                            |  |              |    |      |  |         |  |  |         | 
|CURRENT LIABILITIES:                                            |  |              |    |      |  |         |  |  |         | 
|Current portion of long-term debt                               |  |              | 8  |      |  | 16,620  |  |  | 54,807  | 
|Unearned revenue                                                |  |              | 19 |      |  | 4,127   |  |  | 8,451   | 
|Trade accounts payable                                          |  |              |    |      |  | 1,202   |  |  | 1,575   | 
|Accrued liabilities                                             |  |              | 15 |      |  | 11,275  |  |  | 6,030   | 
|Advances from shareholders                                      |  |              | 9  |      |  | 10,086  |  |  |        | 
|Due to Manager                                                  |  |              |    |      |  | 674     |  |  |        | 
|Total current liabilities                                       |  |              |    |      |  | 43,984  |  |  | 70,863  | 
|                                                                |  |              |    |      |  |         |  |  |         | 
|Derivative liabilities                                          |  |              | 14 |      |  | 242     |  |  | 21,716  | 
|Long-term debt, net of current portion                          |  |              | 8  |      |  | 306,267 |  |  | 413,483 | 
|Time charter discount                                           |  |              | 16 |      |  | 2,766   |  |  |        | 
|Unearned revenue  Long term                                    |  |              | 19 |      |  |        |  |  | 11,765  | 
|Total liabilities                                               |  |              |    |      |  | 353,259 |  |  | 517,827 | 
|                                                                |  |              |    |      |  |         |  |  |         | 
|COMMITMENTS AND CONTINGENCIES                                   |  |              | 11 |      |  |        |  |  |        | 

F-3

---



SAFE BULKERS, INC.
CONSOLIDATED BALANCE SHEETS 
DECEMBER 31, 2007 AND 2008 
(In thousands of U.S. Dollars, except for share and per share data)

|                                                                                                                                                        |  |              |    |      |  |         |  |  |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -- | ---- |  | ------- |  |  | ------- | -
|                                                                                                                                                        |  | December
 31 |   
|                                                                                                                                                        |  |              |   
|                                                                                                                                                        |  | Notes        |    | 2007 |  | 2008    | 
|                                                                                                                                                        |  |              |    |      |  |         | 
|SHAREHOLDERS EQUITY/(DEFICIT):                                                                                                                         |  |              |    |      |  |         |  |  |         |  
|Shareholders equity:                                                                                                                                   |  |              |    |      |  |         |  |  |         |  
|Common stock, $0.001 par value; 500 and
 200,000,000 authorized, 0 and 54,501,334 issued and outstanding at December
 31, 2007 and 2008, respectively   |  |              | 10 |      |  |        |  |  | 55      |  
|Preferred stock, $0.001 par value;
 20,000,000 authorized, none issued or outstanding as of December 31, 2008,
 none authorized as of December 31, 2007 |  |              |    |      |  |        |  |  |        |  
|Additional
 paid in capital                                                                                                                             |  |              |    |      |  |        |  |  | 30      |  
|Retained
 earnings/(deficit)                                                                                                                            |  |              |    |      |  | 54,398  |  |  | (35,630 | )
|Total shareholders equity/(deficit)                                                                                                                    |  |              |    |      |  | 54,398  |  |  | (35,545 | )
|                                                                                                                                                        |  |              |    |      |  |         |  |  |         |  
|Total liabilities and shareholders equity/(deficit)                                                                                                    |  |              |    |      |  | 407,657 |  |  | 482,282 |  
|                                                                                                                                                        |  |              |    |      |  |         |  |  |         |  

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

F-4

---



SAFE BULKERS, INC. 
COMBINED AND CONSOLIDATED STATEMENTS OF INCOME 
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In thousands of U.S. Dollarsexcept for share and per share data)

|                                                        |  |                          |       |      |  |            |   |      |            |   |  |            |  
|------------------------------------------------------- |  | ------------------------ | ----- | ---- |  | ---------- | - | ---- | ---------- | - |  | ---------- | -
|                                                        |  | Year
 Ended December 31, |      
|                                                        |  |                          |      
|                                                        |  | Notes                    |       | 2006 |  | 2007       |   | 2008 |           
|                                                        |  |                          |       |      |  |            |   |      |           
|                                                        |  |                          |       |      |  |            |   |      |           
|REVENUES                                                |  |                          |       |      |  |            |   |      |            |   |  |            |  
|Revenues                                                |  |                          | 12    |      |  | 99,040     |   |      | 172,057    |   |  | 208,411    |  
|Commissions                                             |  |                          |       |      |  | (3,731     | ) |      | (6,209     | ) |  | (7,639     | )
|                                                        |  |                          |       |      |  |            |   |      |            |   |  |            |  
|Net revenues                                            |  |                          |       |      |  | 95,309     |   |      | 165,848    |   |  | 200,772    |  
|                                                        |  |                          |       |      |  |            |   |      |            |   |  |            |  
|EXPENSES:                                               |  |                          |       |      |  |            |   |      |            |   |  |            |  
|Voyage expenses                                         |  |                          |       |      |  | (420       | ) |      | (179       | ) |  | (273)      |  
|Vessel operating expenses                               |  |                          | 13    |      |  | (13,068    | ) |      | (12,429    | ) |  | (17,615    | )
|Depreciation                                            |  |                          | 4, 6  |      |  | (9,553     | ) |      | (9,583     | ) |  | (10,614    | )
|General and administrative expenses                     |  |                          |       |      |  |            |   |      |            |   |  |            |  
|-Management fee to related party                        |  |                          | 3, 18 |      |  | (1,006     | ) |      | (1,177     | ) |  | (4,420     | )
|-Third party expenses                                   |  |                          | 18    |      |  |           |   |      | (2,477     | ) |  | (3,625     | )
|Early redelivery cost                                   |  |                          | 16    |      |  | (150       | ) |      | (21,438    | ) |  | (565       | )
|Gain on sale of assets                                  |  |                          | 20    |      |  | 37,015     |   |      | 112,360    |   |  |           |  
|                                                        |  |                          |       |      |  |            |   |      |            |   |  |            |  
|Operating income                                        |  |                          |       |      |  | 108,127    |   |      | 230,925    |   |  | 163,660    |  
|                                                        |  |                          |       |      |  |            |   |      |            |   |  |            |  
|OTHER (EXPENSE)/ INCOME:                                |  |                          |       |      |  |            |   |      |            |   |  |            |  
|Interest expense                                        |  |                          | 8     |      |  | (6,140     | ) |      | (8,225     | ) |  | (16,392    | )
|Other finance costs                                     |  |                          |       |      |  | (116       | ) |      | (161       | ) |  | (408)      |  
|Interest income                                         |  |                          |       |      |  | 775        |   |      | 1,290      |   |  | 1,492      |  
|Loss on derivatives                                     |  |                          |       |      |  | (1,963     | ) |      | (704       | ) |  | (19,509    | )
|Foreign currency loss                                   |  |                          |       |      |  | (3,279     | ) |      | (13,759    | ) |  | (9,501     | )
|Amortization and write-off of deferred
 finance charges |  |                          | 7     |      |  | (180       | ) |      | (166       | ) |  | (131       | )
|Net income                                              |  |                          |       |      |  | 97,224     |   |      | 209,200    |   |  | 119,211    |  
|                                                        |  |                          |       |      |  |            |   |      |            |   |  |            |  
|Earnings per share in U.S. Dollars, basic
 and diluted  |  |                          | 23    |      |  | 1.78       |   |      | 3.84       |   |  | 2.19       |  
|Weighted average number of shares, basic
 and diluted   |  |                          |       |      |  | 54,500,000 |   |      | 54,500,000 |   |  | 54,500,889 |  

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

F-5

---



SAFE BULKERS, INC. COMBINED
AND CONSOLIDATED STATEMENTS 
OF SHAREHOLDERS EQUITY FOR THE YEARS 
ENDED DECEMBER 31, 2006, 2007 AND 2008 
(In thousands of U.S. Dollars)

|                                |  |               |    |                             |  |                    |  |       |          |   |  |          |  
|------------------------------- |  | ------------- | -- | --------------------------- |  | ------------------ |  | ----- | -------- | - |  | -------- | -
|                                |  | Common
 Stock |    | Additional
 Paid in Capital |  | Retained
 Earnings |  | Total |         
|                                |  |               |    |                             |  |                    |  |       |         
|Balance as
 of January 1, 2006  |  |               |    |                             |  |                   |  |       | 131,827  |   |  | 131,827  |  
|Net income
 for the year        |  |               |   |                             |  |                   |  |       | 97,224   |   |  | 97,224   |  
|                                |  |               |    |                             |  |                    |  |       |          |   |  |          |  
|Balance as of December 31, 2006 |  |               |   |                             |  |                   |  |       | 229,051  |   |  | 229,051  |  
|Net income
 for the year        |  |               |   |                             |  |                   |  |       | 209,200  |   |  | 209,200  |  
|Dividends                       |  |               |   |                             |  |                   |  |       | (383,853 | ) |  | (383,853 | )
|                                |  |               |    |                             |  |                    |  |       |          |   |  |          |  
|Balance as of December 31, 2007 |  |               |   |                             |  |                   |  |       | 54,398   |   |  | 54,398   |  
|Net income                      |  |               |   |                             |  |                   |  |       | 119,211  |   |  | 119,211  |  
|Issuance of
 common stock       |  |               | 55 |                             |  |                   |  |       |         |   |  | 55       |  
|Share based
 compensation       |  |               |   |                             |  | 30                 |  |       |         |   |  | 30       |  
|Dividends                       |  |               |   |                             |  |                   |  |       | (209,239 | ) |  | (209,239 | )
|                                |  |               |    |                             |  |                    |  |       |          |   |  |          |  
|Balance as of December 31, 2008 |  |               | 55 |                             |  | 30                 |  |       | (35,630  | ) |  | (35,545  | )
|                                |  |               |    |                             |  |                    |  |       |          |   |  |          |  

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

F-6

---



SAFE BULKERS, INC. 
COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS 
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008 
(In thousands of U.S. Dollars)

|                                                                                              |  |              |          |      |  |          |   |  |          |  
|--------------------------------------------------------------------------------------------- |  | ------------ | -------- | ---- |  | -------- | - |  | -------- | -
|                                                                                              |  | December 31, |         
|                                                                                              |  |              |         
|                                                                                              |  | 2006         |          | 2007 |  | 2008     |  
|                                                                                              |  |              |          |      |  |          |  
|                                                                                              |  |              |          |      |  |          |  
|Cash Flows from Operating Activities:                                                         |  |              |          |      |  |          |   |  |          |  
|Net income                                                                                    |  |              | 97,224   |      |  | 209,200  |   |  | 119,211  |  
|Adjustments to reconcile net income to net cash
 provided by operating activities:            |  |              |          |      |  |          |   |  |          |  
|Depreciation                                                                                  |  |              | 9,553    |      |  | 9,583    |   |  | 10,614   |  
|Gain on sale of assets                                                                        |  |              | (37,015  | )    |  | (112,360 | ) |  |         |  
|Amortization and write-off of deferred
 finance charges                                       |  |              | 180      |      |  | 166      |   |  | 131      |  
|Unrealized foreign exchange loss                                                              |  |              | 4,331    |      |  | 13,877   |   |  | 9,335    |  
|Unrealized (gain)/loss of derivatives                                                         |  |              | (1,824   | )    |  | (335     | ) |  | 20,097   |  
|Share based compensation                                                                      |  |              |         |      |  |         |   |  | 30       |  
|Amortization of Time charter discount                                                         |  |              |         |      |  | 2,766    |   |  | (2,766   | )
|(Increase)/decrease in:                                                                       |  |              |          |      |  |          |   |  |          |  
|Accounts receivable trade                                                                     |  |              | 1,014    |      |  | (272     | ) |  | 1,189    |  
|Due from Manager                                                                              |  |              | (82,961  | )    |  | 142,997  |   |  | 95,584   |  
|Inventories                                                                                   |  |              | (297     | )    |  | (159     | ) |  | (397     | )
|Accrued revenue                                                                               |  |              |         |      |  |         |   |  | (3,938   | )
|Prepaid expenses and other current assets                                                     |  |              | 265      |      |  | 68       |   |  | (710     | )
|(Decrease)/increase in:                                                                       |  |              |          |      |  |          |   |  |          |  
|Trade accounts payable                                                                        |  |              | (360     | )    |  | 151      |   |  | 373      |  
|Accrued liabilities                                                                           |  |              | 1,069    |      |  | 9,984    |   |  | (5,245   | )
|Unearned revenue                                                                              |  |              | (3,985   | )    |  | 2,840    |   |  | 16,089   |  
|Net Cash (Used in)/Provided by Operating
 Activities                                          |  |              | (12,806  | )    |  | 278,506  |   |  | 259,597  |  
|                                                                                              |  |              |          |      |  |          |   |  |          |  
|Cash Flows from Investing Activities:                                                         |  |              |          |      |  |          |   |  |          |  
|Vessel acquisitions including advances for
 vessels under construction and other fixed assets |  |              | (110,211 | )    |  | (127,875 | ) |  | (89,570  | )
|Proceeds from sale of assets                                                                  |  |              | 76,376   |      |  | 216,291  |   |  |         |  
|Increase in restricted cash                                                                   |  |              |         |      |  |         |   |  | (37,379  | )
|Increase in bank time deposits                                                                |  |              |         |      |  |         |   |  | (21,274  | )
|Net Cash (Used in)/Provided by Investing
 Activities                                          |  |              | (33,835  | )    |  | 88,416   |   |  | (148,223 | )
|                                                                                              |  |              |          |      |  |          |   |  |          |  
|Cash Flows from Financing Activities:                                                         |  |              |          |      |  |          |   |  |          |  
|Proceeds from long-term debt                                                                  |  |              | 60,400   |      |  | 199,000  |   |  | 221,600  |  
|Principal payments of long-term debt                                                          |  |              | (58,474  | )    |  | (56,425  | ) |  | (85,532  | )
|Advances from shareholders                                                                    |  |              | 110,049  |      |  | 83,997   |   |  | 11,489   |  
|Repayment of advances to shareholders                                                         |  |              | (65,245  | )    |  | (209,355 | ) |  | (21,575  | )
|Dividends paid                                                                                |  |              |         |      |  | (383,853 | ) |  | (209,239 | )
|Payment of deferred financing costs                                                           |  |              | (89      | )    |  | (286     | ) |  | (470     | )
|Proceeds on issuance of common stock                                                          |  |              |         |      |  |         |   |  | 55       |  
|Net Cash Provided by/(Used in) Financing
 Activities                                          |  |              | 46,641   |      |  | (366,922 | ) |  | (83,672  | )
|                                                                                              |  |              |          |      |  |          |   |  |          |  
|Net increase in cash and cash equivalents                                                     |  |              |         |      |  |         |   |  | 27,702   |  
|Cash and cash equivalents at beginning of
 year                                               |  |              |         |      |  |         |   |  |         |  
|Cash and cash equivalents at end of year                                                      |  |              |         |      |  |         |   |  | 27,702   |  
|Supplemental cash flow information:                                                           |  |              |          |      |  |          |   |  |          |  
|Cash paid for interest (excluding
 capitalized interest):                                     |  |              | 5,177    |      |  | 7,622    |   |  | 14,116   |  

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

F-7

---



SAFE BULKERS, INC.NOTES TO COMBINED AND 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., referred to herein as 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 Nicolaos Hadjioannou.

The
subsidiaries of Safe Bulkers as of December 31, 2008 are 21 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, 2008, these Subsidiaries owned and operated a fleet of 12 drybulk
vessels, and were scheduled to acquire an additional eight newbuilds (the
Newbuilds).

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 19
Subsidiaries were contributed to Safe Bulkers by Vorini Holdings, Inc. (Vorini
Holdings), a Marshall Islands corporation controlled by Polys Hajioannou and
Nicolaos Hadjioannou, in exchange for the issuance of 54,500,000 shares which
represented 100% of the outstanding common stock of Safe Bulkers (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
accompanying combined and consolidated financial statements include the
operations, assets and liabilities of Safe Bulkers and its Subsidiaries. They
also include the operations, assets and liabilities of five companies (the
Additional Companies), that were under the common control of Polys Hajioannou
and Nicolaos Hadjioannou and whose principal activity was the ownership of
drybulk vessels from their date of incorporation to the date the vessels were
sold. All vessels owned by the Additional Companies were sold prior to December
31, 2007. None of the Additional Companies were contributed to or are owned by
Safe Bulkers.

The
accompanying combined and consolidated financial statements of the Company have
been presented as if the Subsidiaries and Additional Companies were
consolidated subsidiaries of Safe Bulkers for all periods presented and using
the historical carrying costs of the assets and the liabilities of the
ship-owning companies listed below.

|                                |  |                      |  |              |  |       |              
|------------------------------- |  | -------------------- |  | ------------ |  | ----- | -------------
|Subsidiary                      |  | Vessel Name          |  | Type         |  | Built
|                                |  |                      |  |              |  |      
|Efragel Shipping Corporation    |  | Efrossini            |  | Panamax      |  |       | February 2003
|Marindou Shipping Corporation   |  | Maria                |  | Panamax      |  |       | April 2003   
|Avstes Shipping Corporation     |  | Vassos               |  | Panamax      |  |       | February 2004
|Kerasies Shipping Corporation   |  | Katerina             |  | Panamax      |  |       | May 2004     
|Marathassa Shipping Corporation |  | Maritsa              |  | Panamax      |  |       | January 2005 
|Pemer Shipping Ltd.             |  | Pedhoulas
 Merchant  |  | Kamsarmax    |  |       | March 2006   
|Petra Shipping Ltd.             |  | Pedhoulas
 Trader    |  | Kamsarmax    |  |       | May 2006     
|Pelea Shipping Ltd.             |  | Pedhoulas
 Leader    |  | Kamsarmax    |  |       | March 2007   
|Staloudi Shipping Corporation   |  | Stalo                |  | PostPanamax |  |       | January 2006 
|Marinouki Shipping Corporation  |  | Marina               |  | PostPanamax |  |       | January 2006 
|Soffive Shipping Corporation    |  | Sophia               |  | PostPanamax |  |       | June 2007    
|Eniaprohi Shipping Corporation  |  | Eleni                |  | PostPanamax |  |       | November 2008
|Eniadefhi Shipping Corporation  |  | Martine              |  | PostPanamax |  |       | February 2009
|Maxpente Shipping Corporation   |  | TBN                  |  | Capesize     |  |       | 2010 (1)     
|-//-                            |  | Pedhoulas Farmer (2) |  | Kamsarmax    |  |       | January 2007 

F-8

---



|                                    |  |             |  |              |  |       |            
|----------------------------------- |  | ----------- |  | ------------ |  | ----- | -----------
|Subsidiary                          |  | Vessel Name |  | Type         |  | Built
|                                    |  |             |  |              |  |      
|Eptaprohi Shipping Corporation      |  | TBN         |  | Capesize     |  |       | 2010 (1)   
|Maxdodeka Shipping Corporation      |  | TBN         |  | PostPanamax |  |       | 2009 (1)   
|Maxdekatria Shipping Corporation    |  | TBN         |  | PostPanamax |  |       | 2010 (1)   
|Maxdeka Shipping Corporation        |  | TBN         |  | Kamsarmax    |  |       | 2010 (1)(3)
|Maxenteka Shipping Corporation      |  | TBN         |  | Kamsarmax    |  |       | 2010 (1)(3)
|Shikoku Friendship Shipping Company |  | TBN         |  | PostPanamax |  |       | 2010 (1)   
|Maxtessera Shipping Corporation     |  |            |  |             |  |       |           

F-9

---



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

|                                |  |                                        |  |           |  |       |  |                   
|------------------------------- |  | -------------------------------------- |  | --------- |  | ----- |  | ------------------
|Additional
 Company             |  | Vessel
 Name                           |  | Type      |  | Built |  | Date
 Sold        
|                                |  |                                        |  |           |  |       |  |                   
|Pelodimous Shipping Corporation |  | Pelopidas                              |  | Panamax   |  | 2002  |  | November
 30, 2006
|Sofikal Shipping Corporation    |  | Sophia(hereinafter calledOld Sophia) |  | Panamax   |  | 2002  |  | April
 11, 2006   
|Maxtria Shipping Corporation    |  | Pedhoulas Fighter                      |  | Kamsarmax |  | 2007  |  | January
 26, 2007 
|Kanastro Shipping Corporation   |  | Kanaris                                |  | Panamax   |  | 2002  |  | February
 20, 2007
|Eleoussa Shipping Corporation   |  | Eleni(hereinafter calledOld Eleni)   |  | Panamax   |  | 2005  |  | March
 26, 2007   

| |     |                                                 
| | --- | ------------------------------------------------
| | (1) | Estimated completion date
 for newbuild vessels.
| |     |                                                 
| | (2) | Vessel sold in January
 2007.                   
| |     |                                                 
| | (3) | Refer Subsequent Events Note
 24(e).            

Safe Bulkers,
the Subsidiaries and the Additional Companies are collectively referred to in
the notes to the combined and 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), a related party controlled by Polys
Hajioannou, provides technical, commercial and administrative management
services to the Company.

For the years
ended December 31, 2006, 2007 and 2008, the following charterers individually
accounted for more than 10% of the Companys time charter and voyage charter
revenues as follows:

|  |  |               |       |      |  |       |   |  |       |  
|- |  | ------------- | ----- | ---- |  | ----- | - |  | ----- | -
|  |  | December
 31, |      
|  |  |               |      
|  |  | 2006          |       | 2007 |  | 2008  |  
|  |  |               |       |      |  |       |  
|A |  |               | 42.76 | %    |  | 29.87 | % |  | 25.62 | %
|B |  |               | 32.42 | %    |  | 21.07 | % |  |      |  
|C |  |               |      |      |  | 18.24 | % |  | 36.09 | %
|D |  |               |      |      |  |      |   |  | 10.67 | %

F-10

---



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

2. Significant
Accounting Policies:

Principles of
Combination and Consolidation:The accompanying
combined and 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
combination and consolidation.

Use of Estimates:The
preparation of combined and 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 combined and 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 provisions
of Statement of Financial Accounting Standards (SFAS) No. 130 Statement of
Comprehensive Income (SFAS 130) 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 which 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 the Foreign currency gain/(loss) in the
accompanying combined and 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, net 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.

Insurance:Insurance
claims represent the claimable expenses, net of deductibles, which are expected
to be recovered from insurance companies. Any costs to complete the claims are
included in accrued liabilities. The Company accounts for the cost of
additional premiums under its Protection and Indemnity (P&I) Club
insurance

F-11

---



in accordance
with the SFAS No. 5 Accounting for Contingencies based on the
Companys historical experience and the historical experience of the shipping
industry. The Company did not have material insurance claims for any of the
periods presented.

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 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 combined and
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
combined and consolidated statements of income.

Impairment of
Long-lived Assets:The Company applies SFAS No.
144 Accounting
for the Impairment or Disposal of Long-lived Assets (SFAS 144),
which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. The standard requires that long-lived assets and
certain identifiable intangibles held and used or to be disposed of by an
entity be reviewed 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 should evaluate 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 for any of the periods presented.

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 in
accordance with SFAS 144 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. The gain or loss from the
sale of assets is recorded in the combined and consolidated statements of
income.

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 the repayment or refinancing is made, subject to the
provisions of Emerging Issues Task Force (EITF) EITF 96-19, Debtors
Accounting for a Modification or Exchange of Debt Instrument (EITF
96-19) 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 are deferred and amortized
over the term of the respective

F-12

---



credit
facility in the period the refinancing occurs, subject to the provisions of
EITF 98-14, Debtors Accounting for 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 8, 11 and 14). When such derivatives do
not qualify for hedge accounting under SFAS No. 133 Accounting for Derivative Instruments
and Hedging Activities (SFAS 133), the Company records these
financial instruments in the consolidated balance sheet at their fair value as
either a derivative asset or liability, and recognizes the fair value changes
thereto in the combined and 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 combined and consolidated statements of
income. For the years ended December 31, 2006, 2007 and 2008, no derivatives
were accounted for as accounting hedges.

Financial
Instruments:The principal financial assets of the
Company consist of cash and cash equivalents, time deposits, restricted cash,
derivative assets, amounts due from Manager and trade accounts receivable. The
principal financial liabilities of the Company consist of long-term bank loans,
accounts payable, accrued liabilities and derivative liability instruments.

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) Interest rate risk:The
 Companys interest rates and long-term loan repayment terms are described in
 Note 8.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (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 and time deposits 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 counter parties with high credit ratings.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (c) Fair value:The
 carrying values of trade accounts receivable, due from Manager, cash and cash
 equivalents, time deposits, restricted cash, accounts payable and accrued
 liabilities are reasonable estimates of their fair value due to the
 short-term nature of these financial instruments. The fair values of long-
 term bank loans approximate the recorded values, due to their variable
 interest rates. The fair value of over-the-counter foreign exchange forward
 contracts and of the interest rate derivatives, discussed in Note 14, is
 based on a discounted cash flow analysis.                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | The Company
 adopted SFAS No. 157 at the start of its fiscal year beginning January 1,
 2008. SFAS No. 157 establishes a framework for measuring fair value pursuant
 to U.S. GAAP, and expands disclosure requirements relating to fair value
 measurements. In accordance with the requirements of SFAS No. 157, assets and
 liabilities carried at fair value must be classified and disclosed 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

F-13

---



Accounting for
Revenues and Related Expenses:The Company
generates its revenues from charterers for the charter hire of its vessels.
Vessels are chartered mainly 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 for 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).

Vessels can
also be chartered under voyage charter, where a contract is made for the use of
a vessel under which the Company is paid freight on the basis of moving cargo
from a loading port to a discharge port. During the periods presented, there
has been only one instance where a vessel was employed under voyage charter.
Under a voyage charter, the revenues are recognized on a pro-rata basis over
the duration of the voyage from load port to discharge port. Probable losses on
voyages are provided for in full at the time such losses can be estimated.
Related expenses are operating expenses, bunkers and voyage expenses, which are
recognized as incurred and are all paid for by the Company. Demurrage income
represents payments by the charterer to the vessel owner when loading or
discharging time exceeds the stipulated time in the voyage charter and is
recognized when earned and collection is reasonably assured. Dispatch expense
represents payments by the Company to the charterer when loading or discharging
time is less than the stipulated time in the voyage charter and is recognized
as incurred.

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. 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
combined and consolidated statements of income.

Pension and
Retirement Benefit ObligationsCrew:The
Subsidiaries and Additional Companies included in the combined and 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:The
Subsidiaries and Additional Companies that are incorporated under the laws of
either the Republic of Liberia or Marshall Islands are not subject to Liberian
or Marshall Islands income, tonnage or registration taxes. However, each vessel
owing Subsidiary and Additional Company is subject to registration and tonnage
taxes under the laws of the Republic of Cyprus, where all the Companys vessels
are registered, which is not an income tax. These Cypriot taxes are recorded
within Vessel operating expenses in the accompanying combined and consolidated
statements of income.

Furthermore,
the Company has been 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 it has not previously met 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 Company has filed U.S. federal tax returns and
paid the relevant U.S. federal tax on its U.S. source shipping income, which is
not an income tax. Such taxes have been recorded within Vessel operating
expenses in the accompanying combined and consolidated statements of income. In
many cases, these taxes are recovered from the charterers; such amounts
recovered are recorded within Revenues in the accompanying combined and
consolidated statements of income.

Dividends:Dividends
are recorded in the Companys combined and consolidated financial statements in
the period in which they are approved by the Companys Board of Directors.

F-14

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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.

Recent Accounting Pronouncements:

In December
2007, the FASB issued SFAS No. 141 (revised), Business Combinations
(SFAS 141 (revised)). SFAS No. 141 (revised) relates to business combinations
and requires the acquirer to recognize the assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition
date, measured at their fair values as of that date. This Statement applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. An entity may not apply it before that date. The Company
must adopt this standard as of January 1, 2009. As the provisions of SFAS No.
141 (revised) are applied prospectively, the impact to the Company cannot be
determined until any such transaction occurs.

In December
2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statementsan amendment of Accounting Research Bulletin No. 51
(SFAS 160), which establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent, the
amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parents ownership interest and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. The Statement also establishes reporting requirements that
provide sufficient disclosures that clearly identify and distinguish between
the interests of the parent and the interests of the noncontrolling owners.
SFAS 160 is effective as of the beginning of an entitys fiscal year that
begins after December 15, 2008, which will be our fiscal year beginning January
1, 2009. The Companys adoption of SFAS 160 as from January 1, 2009 will not
have any effect on our results of operations, financial position or cash flows.

In March 2008,
the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities (SFAS 161) which requires enhanced disclosures in
respect of derivative instruments and hedging activities. It is effective for
financial statements issued for fiscal years and interim periods beginning
after November 15, 2008, with early application encouraged. As this statement
relates only to disclosure requirements, the Companys adoption of SFAS 161
will not have an impact on its financial position, results of operations or
cash flows.

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
Overseas S.A., a related party that is wholly-owned and controlled by Polys
Hajioannou. Under such agreement (the Management Agreement), each
vessel-owning subsidiary has, 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. Under the Management
Agreement, each of the Subsidiaries that are scheduled to own newbuilds, have
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 the vessel acquisition contracted by Eniadefhi
Shipping Corporation (Eniadefhi).

For the years
ended December 31, 2006 and 2007 and for the period ended May 28, 2008, each of
the Subsidiaries and Additional Companies that had a vessel in operation, had
in place a management agreement with the Manager

F-15

---



(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
annual fee of $50 plus 0.40% on gross freight, charter hire, ballast bonus and
demurrage from each of the vessel-owning companies in exchange for these
management services. The Manager also received a commission, which was to be
separately agreed, on the contract price of the sale of a vessel. This had been
fixed at 1% for all the vessels sold. The Old Management Agreements were
amended on January 1, 2008, whereupon 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, 2006, 2007 and 2008,
amounted to $1,006, $1,177, and $4,420 respectively, and are recorded in the
accompanying combined and consolidated statements of income as General and
Administrative Expenses (see Note 18). Commissions on the contract price of
vessels sold, charged by the Manager during the years ended December 31, 2006,
2007 and 2008, amounted to $781, $2,202, and $0 respectively, and are recorded
within Gain on sale of assets in the combined and consolidated statements of
income (see Note 20). Supervision fees, charged by the Manager during the years
ended December 31, 2006, 2007 and 2008, amounted to $0, $0, and $750
respectively, and are included as part of the vessel cost.

Prior to the
IPO, the Manager retained in its own name the majority of the cash reserves of
the Company on behalf of the Company. Interest received by the Manager was
allocated back to the vessel-owning companies and was recorded as Interest
income in the combined and consolidated statement of income. As of December 31,
2007, the amounts due from the Manager, presented in the consolidated balance
sheet as Due from Manager, represented net cash flows from operating, investing
and financing (including surplus of bank loans received for working capital)
activities, which were retained by the Manager and were due to the Company. As
of December 31, 2008, the amounts due from the Manager, presented in the
consolidated balance sheet represent amounts due from the Manager in relation
to the operating expenses of the vessels.

Transactions with
shareholders:Owners advances prior to June 3,
2008, as well as advances from Vorini Holdings, Inc., represent the receipt of
funds to finance vessel acquisitions. The repayments of these advances are made
with funds received from bank debt, proceeds of vessel sales or vessel
operations. Refer to Note 9 for additional information.

Transactions with
other related parties:Two of the Additional
Companies sold their respective vessels during the periods presented to unrelated
third parties at prevailing market prices, realizing an aggregate profit of
$40,968 for all periods presented. The Gain on sale of assets was recorded in
the accompanying combined and consolidated statements of income in the period
in which the sale was consummated. Following completion of the respective
sales, the vessels were chartered for periods ranging from 10 months to 38
months by SafeFixing Corp. (SafeFixing), a related party which was
wholly-owned by Polys Hajioannou and Nicolaos Hadjioannou that is involved in
the business of chartering-in and chartering-out of unrelated third party
vessels. SafeFixing was sold to an unaffiliated third party following a
decision by the Company on February 20, 2009 to refuse the opportunity to
purchase SafeFixing offered by its owners. Both charters entered into by
SafeFixing were consistent with the then prevailing charter market rate.
Details of the vessel sales transactions are as follows:

|                              |  |            |  |                    |  |                       |  |             |  |                        
|----------------------------- |  | ---------- |  | ------------------ |  | --------------------- |  | ----------- |  | -----------------------
|Additional
 Company           |  | Vessel     |  | Date
 sale agreed  |  | Date
 sale
 concluded |  | Sale
 price |  | Gain on
 sale of
 asset
|                              |  |            |  |                    |  |                       |  |             |  |                        
|Sofikal Shipping Corporation  |  | Old Sophia |  | March 27, 2006     |  | April 11, 2006        |  | 33,900      |  | 14,043                 
|Kanastro Shipping Corporation |  | Kanaris    |  | September 29, 2006 |  | February 2, 2007      |  | 47,300      |  | 26,925                 
|                              |  |            |  |                    |  |                       |  |             |  |                        
|                              |  |            |  |                    |  |                       |  |             |  |                        
|Total                         |  |            |  |                    |  |                       |  |             |  | 40,968                 
|                              |  |            |  |                    |  |                       |  |             |  |                        

The above Gain
on sale of assets is included within the Gain on sale of assets presented in
the combined and consolidated statements of income in the amounts of $37,015
and, $112,360 for the years ended December 31, 2006, and 2007, respectively.
Refer to Note 20 for further information related to the other components of the
total Gain on sale of assets balance.

F-16

---



4. Vessels, Net

Vessels, net,
are comprised of the following:-

|                                                |  |              |         |                           |  |                 |   |  |         |  
|----------------------------------------------- |  | ------------ | ------- | ------------------------- |  | --------------- | - |  | ------- | -
|                                                |  | Vessel
 Cost |         | Accumulated
 Depreciation |  | Net Book
 Value |  
|                                                |  |              |         |                           |  |                 |  
|Balance,
 January 1, 2007                       |  |              | 218,396 |                           |  | (15,795         | ) |  | 202,601 |  
|Transfer
 from advances for vessel acquisitions |  |              | 61,704  |                           |  |                |   |  | 61,704  |  
|Depreciation
 expense                           |  |              |        |                           |  | (9,488          | ) |  | (9,488  | )
|                                                |  |              |         |                           |  |                 |   |  |         |  
|Balance, December 31, 2007                      |  |              | 280,100 |                           |  | (25,283         | ) |  | 254,817 |  
|Transfer
 from advances for vessel acquisitions |  |              | 42,643  |                           |  |                |   |  | 42,648  |  
|Depreciation
 expense                           |  |              |        |                           |  | (10,510         | ) |  | (10,510 | )
|                                                |  |              |         |                           |  |                 |   |  |         |  
|Balance, December 31, 2008                      |  |              | 322,743 |                           |  | (35,793         | ) |  | 286,955 |  
|                                                |  |              |         |                           |  |                 |   |  |         |  

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

| |   |                                                                             
| | - | ----------------------------------------------------------------------------
| |  | During the
 year ended December 31, 2007: Pedhoulas
 Leader and Sophia;
 and
| |   |                                                                             
| |  | During the
 year ended December 31, 2008: Eleni.                            

As of December
31, 2008, all of the Companys vessels have been provided as collateral to
secure the Companys bank loans as discussed in Note 8.

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, 2007                                   |  |  | 50,565  |  
|Advances paid                                               |  |  | 127,797 |  
|Vessel sales                                                |  |  | (63,386 | )
|Transferred to vessel cost                                  |  |  | (61,704 | )
|                                                            |  |  |         |  
|Balance, December 31, 2007                                  |  |  | 53,272  |  
|Advances paid, including capitalized
 expenses and interest |  |  | 89,570  |  
|Transferred to vessel cost                                  |  |  | (42,648 | )
|                                                            |  |  |         |  
|Balance, December 31, 2008                                  |  |  | 100,194 |  
|                                                            |  |  |         |  

Advances for
vessels under construction relate to payment of installments due to the
respective shipyards or sellers relating to the following vessels:

| |   |                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the
 year ended December 31, 2007: Pedhoulas
 Leader and Sophiaand newbuilds owned by Maxdodeka Shipping
 Corporation, Maxdekatria Shipping Corporation, Maxdeka Shipping Corporation
 (Maxdeka), and Maxenteka Shipping Corporation (Maxenteka); and                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                       
| |  | During the
 year ended December 31, 2008: Eleni
 and newbuilds owned or contracted for by Eniadefhi, Maxpente Shipping
 Corporation (Maxpente), Eptaprohi Shipping Corporation (Eptaprohi) and
 Shikoku Friendship Shipping Company. The newbuild contract with respect to
 Eptaprohi has subsequently been cancelled, as discussed in Note 24(d).

Transfers to
vessel cost relate to the delivery to the Company from the respective shipyard,
of the following vessels:

| |   |                                                                             
| | - | ----------------------------------------------------------------------------
| |  | During the
 year ended December 31, 2007: Pedhoulas
 Leader and Sophia;
 and
| |   |                                                                             
| |  | During the
 year ended December 31, 2008: Eleni.                            

F-17

---



Vessel sales
during the year ended December 31, 2007 represent the sale of two vessels under
construction, the Pedhoulas Farmer
and the Pedhoulas Fighter. Refer
to Note 20 for further details.

6. Other Fixed Assets, Net

Other fixed
assets represent minor movable equipment on board the vessels, which are
depreciated on a straight-line basis over five years, comprising of a cost of
$511 and accumulated depreciation of $364 and $260 as of December 31, 2008 and
2007 respectively. Depreciation charges for the years ended December 31, 2007
and 2008 amounted to $95 and $104, respectively.

7. Deferred Finance Charges, Net

Deferred
finance charges are comprised of the following:

|                                     |  |  |      |  
|------------------------------------ |  |  | ---- | -
|Balance,
 January 1, 2007            |  |  | 314  |  
|Additions                            |  |  | 286  |  
|Write-off due to debt extinguishment |  |  | (106 | )
|Amortization expense                 |  |  | (60  | )
|                                     |  |  |      |  
|Balance, December 31, 2007           |  |  | 434  |  
|Additions                            |  |  | 470  |  
|Write-off due to debt extinguishment |  |  | (38  | )
|Amortization expense                 |  |  | (93  | )
|                                     |  |  |      |  
|Balance, December 31, 2008           |  |  | 773  |  
|                                     |  |  |      |  

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

8. Bank Debt

Bank debt is
comprised of the following secured borrowings:

|                  |  |              |         |      |  |         | 
|----------------- |  | ------------ | ------- | ---- |  | ------- | 
|                  |  | December 31, |        
|                  |  |              |        
|Borrower          |  | 2007         |         | 2008 | 
|                  |  |              |         |      | 
|Efragel           |  |              | 23,812  |      |  | 41,250  | 
|Marindou          |  |              | 13,580  |      |  | 41,250  | 
|Kerasies          |  |              | 40,000  |      |  | 38,400  | 
|Marathassa        |  |              | 23,578  |      |  | 22,526  | 
|Avstes            |  |              |        |      |  | 35,100  | 
|Marinouki         |  |              | 30,432  |      |  | 32,075  | 
|Staloudi          |  |              | 30,428  |      |  | 56,600  | 
|Petra             |  |              | 38,445  |      |  | 37,071  | 
|Pemer             |  |              | 36,262  |      |  | 37,068  | 
|Pelea             |  |              | 41,350  |      |  | 38,750  | 
|Soffive           |  |              | 45,000  |      |  | 43,200  | 
|Eniaprohi         |  |              |        |      |  | 45,000  | 
|                  |  |              |         |      |  |         | 
|Total             |  |              | 322,887 |      |  | 468,290 | 
|                  |  |              |         |      |  |         | 
|                  |  |              |         |      |  |         | 
|Current portion   |  |              | 16,620  |      |  | 54,807  | 
|                  |  |              |         |      |  |         | 
|Long-term portion |  |              | 306,267 |      |  | 413,483 | 
|                  |  |              |         |      |  |         | 

Efragel Old Loan:
In March 2003, Efragel Shipping Corporation (Efragel) obtained a bank loan
for $16,000 to finance the purchase price of the vessel Efrossini. In November 2004, Efragel
obtained a reducing revolving credit facility for up to $30,000 (the Efragel
old credit facility) and repaid the $16,000 bank loan. The Efragel old credit
facility bore interest at the London Interbank Offered Rate (LIBOR) plus a
margin and was repayable over ten years in 20 semi-annual installments and a
balloon payment at maturity. The ability to drawdown on the credit

F-18

---



facility was
reduced with each semi-annual repayment. Prior to the end of each interest
period, the borrower could elect to convert at the beginning of the following
interest period the outstanding loan amount or any part thereof to up to two of
the following currencies, using the spot exchange rate applicable on the date
of conversion: USD, JPY, CHF or EUR. This election was exercised. The average
interest rate (including the margin) during the years 2007 and 2008 was 3.530%
p.a. and 2.830% p.a., respectively. The Efragel old credit facility was repaid
on January 17, 2008, through the proceeds of the Efragel loan described further
below.

Marindou Old Loan:
In May 2003, Marindou Shipping Corporation (Marindou) obtained a bank loan
for $16,000 to finance the purchase price of the vessel Maria (the Marindou old loan). The
Marindou old loan bore interest at LIBOR plus a margin and was repayable over
ten years in 20 semi-annual installments and a balloon payment at maturity.
Prior to the end of each interest period, the borrower could elect to convert
at the beginning of the following interest period the outstanding loan amount
or any part thereof to up to two of the following currencies, using the spot
exchange rate applicable on the date of conversion: USD, JPY, CHF or EUR. This
election was exercised. The average interest rate (including the margin) during
the years 2007 and 2008 was 3.053% p.a. and 3.482% p.a., respectively. The
Marindou old loan was repaid on January 17, 2008, through the proceeds of the Marindou
loan described further below.

Kerasies Old Loan:
In May 2004, Kerasies Shipping Corporation (Kerasies) obtained a bank loan
for $28,000 to finance the purchase price of the vessel Katerina and obtain working capital (the
Kerasies old loan). The Kerasies old loan bore interest at LIBOR plus a
margin and was repayable over 12 years in 24 semi-annual installments and a
balloon payment at maturity. Prior to the end of each interest period, the
borrower could elect to convert at the beginning of the following interest
period the outstanding loan amount or any part thereof to up to two of the
following currencies, using the spot exchange rate applicable on the date of
conversion: USD, JPY, CHF, EUR, CAD or GBP. This election was exercised. The
average interest rate (including the margin) during the year 2007 was 2.339%
p.a. The Kerasies old loan was repaid on December 14, 2007 through the proceeds
of the Kerasies loan described further below; hence the Kerasies old loan is
not included in the chart above.

Marathassa Loan:
In February 2005, Marathassa Shipping Corporation (Marathassa) obtained a
bank loan for $28,000 to finance the purchase price of the vessel Maritsaand obtain working capital (the
Marathassa loan). The Marathassa loan bears interest at LIBOR plus a margin
and is repayable over 12 years in 24 semi-annual installments and a balloon
payment at maturity. Subject to certain restrictions and prior to the end of
each interest period, the borrower may elect to convert at the beginning of the
following interest period the outstanding loan amount or any $1,000 integral
multiple thereof to any of the following currencies, with the limitation that
in consequence of such conversion, there would be no more than two currencies
outstanding, using the spot exchange rate applicable on the date of conversion:
USD, JPY, CHF, EUR, CAD or GBP. This election has been exercised. The average
interest rate (including the margin) during the years 2007 and 2008 was 4.589%
p.a. and 3.802% p.a., respectively. As of December 31, 2008, the outstanding
balance of the Marathassa loan in the amount of $22,526 ($10,728 and CHF
12,461,600) was payable in 17 semi-annual installments from February 2009 to
February 2017, plus a balloon payment payable in February 2017. On February 23,
2009 together with the repayment due on that date, Marathassa converted the
outstanding portion of the loan denominated in Swiss francs of CHF 11,991,600
into USD.

Marinouki Loan:
In March 2006, Marinouki Shipping Corporation (Marinouki) obtained a bank
loan for $30,400 to refinance the purchase price of the vessel Marina and obtain working capital (the
Marinouki loan). The Marinouki loan bears interest at LIBOR plus a margin and
is repayable over 12 years in 24 semi-annual installments and a balloon
payment. Subject to certain restrictions and prior to the end of each interest
period, the borrower may elect to convert at the beginning of the following
interest period the outstanding loan amount or any $1,000 integral multiple
thereof to any of the following currencies, with the limitation that in
consequence of such conversion, there would be no more than two currencies
outstanding, using the spot exchange rate applicable on the date of conversion:
USD, JPY, CHF, EUR, CAD or GBP. This election was exercised. In March 2008, the
Company exercised its multi-currency conversion option and converted the
remaining JPY loan outstanding to USD. In April, 2008 an amendment was entered
into between Marinouki and the bank to increase the loan facility by $4,000,
which was the result of exchange loss incurred on conversion of March 2008. The
average interest rate (including the margin) during the years 2007 and 2008 was
2.114% p.a. and 3.104% p.a., respectively. As of December 31, 2008, the
outstanding balance of the Marinouki loan in the amount of $32,075 was payable
in 19 semi-annual installments from March 2009 to March 2018, plus a balloon
payment payable in March 2018.

F-19

---



Staloudi Old Loan:
In May 2006, Staloudi Shipping Corporation (Staloudi) obtained a
bank loan for $30,000 to finance the cost of the vessel Stalo
(the Staloudi old loan). The Staloudi loan bore interest at LIBOR
plus a margin and was repayable over ten years in 20 semi-annual installments
and a balloon payment at maturity. Prior to the end of each interest period,
the borrower could elect to convert at the beginning of the following interest
period up to 85% p.a. of the outstanding loan amount to up to two of the
following currencies, using either the spot exchange rate applicable on the
date of conversion, or the forward exchange rate on the date of conversion
notice; USD, JPY, CHF, EUR, CAD or GBP. This election was exercised. The
average interest rate (including the margin) during the years 2007 and 2008 was
3.542% p.a. and 5.151% p.a., respectively. The Staloudi old loan was repaid on
July 7, 2008 through the proceeds of the Staloudi loan described further below.

Petra Loan:
In January 2007, Petra Shipping Corporation (Petra) obtained a bank loan for
$36,000 to finance the purchase price of the vessel Pedhoulas Trader (the Petra loan). The Petra loan bears
interest at LIBOR plus a margin and is repayable over 12 years in 24
semi-annual installments and a balloon payment at maturity. Prior to the end of
each interest period, the borrower could elect to convert at the beginning of
the following interest period the outstanding loan amount or any part thereof
to up to three of the following currencies, using the spot exchange rate
applicable on the date of conversion: USD, JPY, CHF, EUR or GBP. This election
was exercised. In January 2008, the Company exercised its multi-currency
conversion option and converted the remaining JPY loan outstanding to USD. In
May, 2008 an amendment was entered into between Petra and the bank whereby the
loan facility was increased by $4,171, which was the result of exchange loss
incurred on conversion of the loan in January 2008, and the multi-currency
conversion option was cancelled. In November, 2008 an amendment was entered
into between Petra and the bank, whereby a cash collateral deposit of USD 2,000
that was maintained with the bank in the name of Petra as security for the
Petra loan was released to Petra. The average interest rate (including the
margin) during the years ended December 31, 2007 and 2008 was 3.371% p.a. and
3.790% p.a., respectively. As of December 31, 2008, the outstanding balance of
the Petra loan in the amount of $37,071 was payable in 21 semi-annual
installments from January 2009 to January 2019, plus a balloon payment payable
in January 2019.

Pemer Loan:
In March 2007, Pemer Shipping Corporation (Pemer) obtained a bank loan for
$36,000 to finance the purchase price of the vesselPedhoulas Merchant (the Pemer loan). The Pemer loan bears
interest at LIBOR plus a margin and is repayable over 12 years in 24
semi-annual installments and a balloon payment at maturity. Prior to the end of
each interest period, the borrower may elect to convert at the beginning of the
following interest period the outstanding loan amount or any part thereof to up
to three of the following currencies, using the spot exchange rate applicable
on the date of conversion: USD, JPY, CHF, EUR or GBP. This election was
exercised. In March 2008, the Company exercised its multi-currency conversion
option and converted the remaining JPY loan outstanding to USD. In May, 2008 an
amendment was entered into between Pemer and the bank whereby the loan facility
was increased by $4,168, which was the result of exchange loss incurred on
conversion of the loan in March 2008, and the multi-currency conversion option
was cancelled. In November, 2008 an amendment was entered into between Pelea
and the bank, whereby a cash collateral deposit of USD 2,000 that was
maintained with the bank in the name of Pelea as security for the Pelea loan
was released to Pelea. The average interest rate (including the margin) during
the year ended December 31, 2007 and 2008 was 1.500% p.a. and 3.279% p.a.,
respectively. As of December 31, 2008, the outstanding balance of the Pemer
loan in the amount of $37,068 was payable in 21 semi-annual installments from
March 2009 to March 2019, plus a balloon payment payable in March 2019.

Pelea Loan:
In June 2007, Pelea Shipping Corporation (Pelea) obtained a reducing
revolving credit facility in the amount of $42,000 to finance the purchase
price of the vessel Pedhoulas Leader
(the Pelea credit facility). The Pelea credit facility bears interest at
LIBOR plus a margin and is repayable over 12 years in 24 semi-annual payments
and a balloon at maturity. The ability to drawdown on the credit facility is
reduced with each semi-annual repayment. Subject to certain restrictions and
prior to the drawdown date or at any time during the life of the facility, the
borrower may elect to convert the outstanding loan amount or any part thereof
to any of the following currencies, using the spot exchange rate applicable on
the date of conversion: USD, JPY, CHF or EUR. In December, 2008 Pelea effected
a prepayment of USD 1,300 against the outstandings of the Pelea credit
facility. The average interest rate (including the margin) during the years
ended December 31, 2007 and 2008 was 6.008% p.a. and 4.555% p.a., respectively.
As of December 31, 2008, the outstanding balance of the Pelea credit facility
amounted to $38,750. The outstanding balance as of December 31, 2008 was
payable in 21 semi-annual installments from June 2009 to June 2019, plus a
balloon payment payable in June 2019.

F-20

---



Soffive Loan:
In November 2007, Soffive Shipping Corporation (Soffive) obtained a bank loan
for $45,000 to finance the purchase price of the vessel Sophia (the Soffive loan) and repay
owners advances of certain Subsidiaries. The Soffive loan bears interest at
LIBOR plus a margin and is repayable over 12 years in 24 semi-annual
installments and a balloon at maturity. Subject to certain restrictions and
prior to the end of each interest period, the borrower may elect to convert at
the beginning of the following interest period the outstanding loan amount or
any $1,000 integral multiple thereof to any of the following currencies, with
the limitation that in consequence of such conversion, there would be no more
than two currencies outstanding, using the spot exchange rate applicable on the
date of conversion: USD, JPY, CHF, EUR, CAD or GBP. The average interest rate
(including the margin) during the years ended December 31, 2007 and 2008 was
5.445% p.a. and 4.303% p.a., respectively. As of December 31, 2008, the
outstanding balance of the Soffive loan was $43,200 payable in 22 semi-annual
installments from May 2009 to November 2019, plus a balloon payment payable in
November 2019.

Kerasies Loan:
In December 2007, Kerasies obtained a bank loan for up to $40,000 (the
Kerasies loan), which was used to repay the Kerasies old loan, as well as to
repay owners advances of certain Subsidiaries. The Kerasies loan bears interest
at LIBOR plus a margin and is repayable over 12 years in 24 semi-annual
installments and a balloon payment at maturity. Subject to certain restrictions
and prior to the end of each interest period, the borrower may elect to convert
at the beginning of the following interest period the outstanding loan amount
or any $1,000 integral multiple thereof to any of the following currencies,
with the limitation that in consequence of such conversion, there would be no
more than two currencies outstanding, using the spot exchange rate applicable
on the date of conversion: USD, JPY, CHF, EUR, CAD or GBP. The average interest
rate (including the margin) during the years ended December 31, 2007 and 2008
was 5.575% p.a. and 4.075% p.a., respectively. As of December 31, 2008, the
outstanding balance of the Kerasies loan amounted to $38,400 which was payable
in 22 semi-annual installments from June 2009 to December 2019, plus a balloon
payment payable in December 2019.

Efragel Loan:
In January 2008, Efragel obtained a reducing revolving credit facility in the
amount of $42,000, which was drawn to repay the Efragel old loan, repay owners
advances of certain Subsidiaries and fund dividends to the owners (the Efragel
credit facility). The Efragel credit facility bears interest at LIBOR plus a
margin and is repayable over 10 years in 20 semi-annual payments and a balloon
at maturity. The ability to drawdown on the credit facility is reduced with
each semi-annual repayment. Subject to certain restrictions and prior to the
drawdown date or at any time during the life of the facility, the borrower may
elect to convert the outstanding loan amount or any part thereof to any of the
following currencies, using the spot exchange rate applicable on the date of
conversion: USD, JPY, CHF or EUR. The average interest rate (including the
margin) during the year ended December 31, 2008 was 4.159% p.a. As of December
31, 2008, the outstanding balance of the Efragel credit facility amounted to
$41,250 and was payable in 19 semi-annual installments from January 2009 to
January 2018, plus a balloon payment payable in January 2018.

Marindou Loan:
In January 2008, Marindou obtained a reducing revolving credit facility in the
amount of $42,000, which was drawn to repay the Marindou old loan, repay owners
advances of certain Subsidiaries and fund dividends to the owners (the
Marindou credit facility). The Marindou credit facility bears interest
at LIBOR plus a margin and is repayable over 10 years in 20 semi-annual payments
and a balloon at maturity. The ability to drawdown on the credit facility is
reduced with each semi-annual repayment. Subject to certain restrictions and
prior to the drawdown date or at any time during the life of the facility, the
borrower may elect to convert the outstanding loan amount or any part thereof
to any of the following currencies, using the spot exchange rate applicable on
the date of conversion: USD, JPY, CHF or EUR. The average interest rate
(including the margin) during the year ended December 31, 2008 was 4.346% p.a.
As of December 31, 2008, the outstanding balance of the Marindou credit
facility amounted to $41,250 and was repayable in 19 semi-annual installments
from January 2009 to January 2018, plus a balloon payment payable in January
2018.

Avstes Loan:
In April 2008, Avstes obtained a reducing revolving credit facility in the
amount of $36,000, which was drawn to repay owners advances of certain
Subsidiaries and fund dividends to the owners (the Avstes credit facility).
The Avstes credit facility bears interest at LIBOR plus a margin and is
repayable over 10 years in 20 semi-annual payments and a balloon at maturity.
The ability to drawdown on the credit facility is reduced with each semi-annual
repayment. Subject to certain restrictions and prior to the drawdown date or at
any time during the life of the facility, the borrower may elect to convert the
outstanding loan amount or any part thereof to any of the following currencies,
using the spot exchange rate applicable on the date of conversion: USD, JPY,
CHF or EUR. The average interest rate (including the margin) during the year
ended December 31, 2008 was 4.154% p.a. As of

F-21

---



December 31,
2008, the outstanding balance of the Avstes credit facility amounted to $35,100
and is repayable in 19 semi-annual installments from April 2009 to April 2018,
plus a balloon payment payable in April 2018.

Staloudi Loan:
In July 2008, Staloudi obtained a bank loan for up to $56,600 (the Staloudi
loan), which was drawn to repay the Staloudi Old Loan, and to increase the
Companys cash reserves. The Staloudi loan bears interest at LIBOR plus a
margin and is repayable over 15 years in 30 semi-annual installments and a
balloon payment at maturity. The bank has the right to cancel the loan in July
2018 and demand the repayment of the outstanding amount at the time. The
average interest rate (including the margin) during the year ended December 31,
2008 was 3.558% p.a. As of December 31, 2008, the outstanding balance of the
Staloudi loan amounted to $56,600 and is payable in 30 semi-annual installments
from January 2009 to July 2023, plus a balloon payment payable in July 2023.

Eniaprohi Loan:
In November 2008, Eniaprohi obtained a reducing revolving credit facility in
the amount of $45,000, which was drawn to finance the purchase price of the
vessel Eleniand increase the
Companys cash reserves (the Eniaprohi credit facility). The Eniaprohi credit
facility bears interest at LIBOR plus a margin and is repayable over 10 years
in 19 semi-annual payments commencing in May 2009 and a balloon payment at
maturity in November 2018. The ability to drawdown on the credit facility is
reduced with each semi-annual repayment. Subject to certain restrictions and
prior to the drawdown date or at any time during the life of the facility, the
borrower may elect to convert the outstanding loan amount or any part thereof
to any of the following currencies, using the spot exchange rate applicable on the
date of conversion: USD, JPY, CHF or EUR. The average interest rate (including
the margin) during the year ended December 31, 2008 was 3.445% p.a.

No further
amount was available for drawing as of December 31, 2008 in any of the above
loans and reducing revolving credit facilities.

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 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 guidance in paragraph 12 of SFAS 133, 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 SFAS 133.                                                                                                                 

However, the
Company believes that the conversion option under the borrowing arrangements
have 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 such, all
loans outstanding at the end of each period denominated in other currencies
have been translated into USD using the spot rate applicable at each period
end. Any resulting translation gain or loss is recorded as Foreign currency
gain/(loss) on the combined and consolidated statements of income.

F-22

---



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;                                                                     
| |   |                                                                                                                                                         
| |  | Cross
 corporate guarantees issued by each of Efragel, Pelea, Avstes, Marindou and
 Eniaprohi as security for the credit facility of each guarantor; and
| |   |                                                                                                                                                         
| |  | Corporate
 guarantee from Safe Bulkers.                                                                                                                 

The loan and
credit facility agreements 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. Under
certain loans, in the event that the outstanding amounts in currencies other
than the U.S. dollar exceed at any time 100% or 110% (as the case may be) of
the U.S. dollar equivalent amount that is specified in the relevant loan
agreement for the applicable period, the lending bank has the option to require
the borrower to either make a loan prepayment or provide cash collateral
security in an amount necessary for the outstanding to comply with the above
calculation. In five 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 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% (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);                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                         
| |  | its
 net consolidated worth (total consolidated assets less total consolidated
 liabilities) (Consolidated Net Worth Covenant) must not at any time be less
 than $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 four vessels;                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                         
| |  | 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, 2008, the Company was in compliance with all debt covenants with respect to
the Pemer, Petra and Staloudi loans and related corporate guarantees.

Pursuant to
letter agreements that the Company entered into on February 18, 2009, relating
to the Marathassa, Marinouki, Kerasies and Soffive loans, the relevant lender
confirmed that the Company was in compliance with the Minimum Value Covenant as
of December 31, 2008, on the basis of the lenders amended Minimum Value
Covenant proposal set forth in those letter agreements. The Company accepted
this Minimum Value Covenant proposal by entering into supplemental agreements
with the lender dated April 6, 2009 relating to those facilities, which
superseded the prior letter agreements. Pursuant to the supplemental
agreements, the following terms of the loan agreements were amended (i) the
calculation for market value of the respective security vessel was amended to
include the fair market value of any attached charter contracts, and (ii) the
margin was amended. The supplemental

F-23

---



agreements
further provide for a reduction of the margin by 10 basis points to that part
of the loan balance that is equal to the amount of cash maintained in an
account pledged in favor of the lender, provided that: (i) such pledged amount
is on deposit for the entire duration of the applicable interest period, and in
any case for not less than three months, and (ii) there is no change in the
capital adequacy treatment applying to the borrowers account pledge that is
detrimental to the lender. The lender has subsequently confirmed to the Company
by letters dated April 29, 2009 that as of April 6, 2009 there is no
breach of covenant or warranty that exists or is continuing in relation to the
relevant facilities. Although not asserted by the lender, the Company believes
that it was in breach of the Minimum Value Covenant under the original terms of
these facilities, and consequently of the Consolidated Leverage Covenant and
the Consolidated Net Worth Covenant of the respective corporate guarantees,
prior to signing the letter agreements with the lender, but such breach was
cured by entry into the letter agreements and supplemental agreements, as
confirmed by the letters dated April 29, 2009.

Pursuant to a
letter agreement, dated February 6, 2009, relating to the Efragel, Avstes,
Pelea, Marindou and Eniaprohi credit facilities, our lender asserted breaches
of the Consolidated Leverage Covenant, Consolidated Net Worth Covenant and
Minimum Value Covenant and waived compliance with these provisions until March
31, 2009. On March 31, 2009, supplemental agreements in respect of these credit
facilities and the Eniadefhi credit facility (see Note 11 (a)) were signed with
the respective lender. Under the terms of these supplemental agreements, with
effect from December 31, 2008, the lender waived any events of default that may
have occurred between December 31, 2008 and March 30, 2009, with respect to any
breach by the Company of the Minimum Value Covenant, the Consolidated Leverage
Covenant, the Consolidated Net Worth Covenant and the Debt to EBITDA Ratio
Covenant of these facilities, including those set forth in the corporate
guarantees of Safe Bulkers. In connection with such waiver, and pursuant to the
supplemental agreements, the Company has undertaken to prepay an amount
sufficient to restore compliance with the Minimum Value Covenant at the next
interest payment date of each respective credit facility (roll over date).
The prepayments for each credit facility will be applied in order of maturity
for the three principal payments following the next rollover date and applied
pro-rata thereafter. The Company has included in the table below the estimated
prepayments based on the valuations of the respective security vessels as of
December 31, 2008 and the application of those prepayments to the outstanding
installments on the basis of those valuations. The actual prepayment amounts
may differ from these estimates, as in accordance with the supplemental
agreements prior to the forthcoming interest payment of each credit facility,
the Company is required to obtain new valuations on the basis of which the
prepayment amounts will be calculated. In addition, in the event that during
the twelve month period ending March 31, 2010, any charterparty agreement of
the group is cancelled, any of its terms are waived or the charter rates
decrease, the Company must demonstrate to the lender that it has the necessary
cash resources to meet its newbuild commitments (assuming no more than $15,000
of bank financing in respect of any newbuild that does not have committed
financing), while maintaining a minimum cash balance of $25,000, in order to
continue paying dividends. The margins of these facilities were not amended.

The estimated
minimum annual principal payments required to be made after December 31, 2008,
based on the loan agreements and supplemental agreements are as follows:

|                     |  |  |         | 
|-------------------- |  |  | ------- | 
|To December 31,      |  |  |         | 
|                     |  |  |         | 
|                     |  |  |         | 
|2009                 |  |  | 54,807  | 
|2010                 |  |  | 14,679  | 
|2011                 |  |  | 22,635  | 
|2012                 |  |  | 24,239  | 
|2013                 |  |  | 24,773  | 
|2014 and
 thereafter |  |  | 327,157 | 
|                     |  |  |         | 
|Total                |  |  | 468,290 | 
|                     |  |  |         | 

Total interest
incurred on long-term debt for the years ended December 31, 2006, 2007 and 2008
amounted to $6,140, $8,225 and $16,696, respectively which includes interest
capitalized of $304 for the year ended December 31, 2008. No interest was
capitalized for the other periods presented. The average interest rate
(including the margin) for all loan facilities during the years 2006, 2007 and
2008 was 3.269% p.a., 3.353% p.a. and 4.030% p.a., respectively.

F-24

---



9. Advances from Shareholders

Advances from
shareholders represent cash advanced by the shareholders of the Company to
finance vessel acquisitions. The shareholders advances were non-interest
bearing, unsecured and had no fixed terms of repayment.

Advances from
shareholders for the periods presented are as follows:

|                           |  |  |          |  
|-------------------------- |  |  | -------- | -
|Balance,
 January 1, 2007  |  |  | 135,444  |  
|Advances
 received         |  |  | 83,997   |  
|Repayment of
 advances     |  |  | (209,355 | )
|                           |  |  |          |  
|Balance, December 31, 2007 |  |  | 10,086   |  
|Advances
 received         |  |  | 11,489   |  
|Repayment of
 advances     |  |  | (21,575  | )
|                           |  |  |          |  
|Balance, December 31, 2008 |  |  |         |  
|                           |  |  |          |  

Repayment of
advances was funded from bank debt or from surpluses from operation.

The average
balance of the Advances from shareholders during the years ended December 31,
2007 and 2008 was $101,906 and $5,983, respectively.

10. Share Capital

The Company
was incorporated on December 11, 2007 with authorized share capital of 500
shares of common stock with 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, 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. In connection with the IPO process, Vorini
Holdings, Inc. sold 10,000,000 shares of common stock of the Company of par
value of $0.001 per share at a price of $19 per share. No proceeds were paid to
the Company.

According to
an arrangement approved by the Companys corporate governance, nominating and
compensation committee, the audit committee chairman, Mr. Frank Sica, 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 that services were provided and are issued as
soon as practicable following the end of the quarter.

On
October 10, 2008, the Company issued 1,334 shares of common stock to Mr.
Frank Sica.

On
January 9, 2009, the Company issued a further 2,655 shares of common stock
to Mr. Frank Sica.

On
April 6, 2009, the Company issued a further 4,918 shares of common stock
to Mr. Frank Sica.

11. Commitments and
Contingencies

|    |                   
|--- | ------------------
|(a) | Credit facilities:

In September
2008, Eniadefhi signed the documentation for a multi-currency reducing
revolving credit facility for up to $45,000 (the Eniadefhi credit facility).
The Eniadefhi credit facility was made available upon delivery from the
shipyard of Martine
on February 12, 2009, when an aggregate amount of $40,000 was drawn and was
used to fund the acquisition of Martine and to increase the cash reserves
of the Company, as discussed in Note 24(b). The Eniadefhi credit facility is
repayable over ten years in 17 semi-annual consecutive installments commencing
in February 2011, the first of $625 and the remaining 16 each of $1,125, and a
balloon payment of $22,500 payable with the final installment in February 2019.
The ability to drawdown on the Eniadefhi credit facility will reduce with each
semi-annual repayment. Subject to certain restrictions and prior to the
drawdown date or at anytime during the

F-25

---



life of the
facility, the borrower may elect to convert the then outstanding loan amount or
any part thereof to up to two of the following currencies, using the spot
exchange rate applicable on the date of conversion: USD, JPY, CHF or EUR. The
Eniadefhi credit facility is secured by a first priority mortgage over the Martine
and other usual maritime securities, a corporate guarantee of Safe Bulkers,
which includes financial covenants described in Note 8, as well as by corporate
guarantees from Efragel, Avstes, Marindou, Pelea and Eniaprohi. A commitment
fee of 0.2% per annum of any undrawn facility amount is payable quarterly.

|    |                                                                              
|--- | -----------------------------------------------------------------------------
|(b) | Commitments under Shipbuilding Contracts
 and Memoranda of Agreement (MOAs)

As of December
31, 2008, the Company had commitments under three shipbuilding contracts and
five MOAs for the acquisition of eight newbuilds. The Company expects to settle
the commitments under these as follows:

|                         |  |                             |         |                 |  |       |       |  |  |  |         |  | 
|------------------------ |  | --------------------------- | ------- | --------------- |  | ----- | ----- |  |  |  | ------- |  | 
|Year
 Ending December 31 |  | Due to
 Shipyards / Sellers |         | Due to
 Manager |  | Total |      
|                         |  |                             |         |                 |  |       |      
|2009                     |  |                             | 193,400 |                 |  |       | 2,235 |  |  |  | 195,635 |  | 
|2010                     |  |                             | 231,886 |                 |  |       | 5,194 |  |  |  | 237,080 |  | 
|                         |  |                             |         |                 |  |       |       |  |  |  |         |  | 
|Total                    |  |                             | 425,286 |                 |  |       | 7,429 |  |  |  | 432,715 |  | 
|                         |  |                             |         |                 |  |       |       |  |  |  |         |  | 

|    |                             
|--- | ----------------------------
|(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 which 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 combined and 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 combined and consolidated financial statements. A maximum of
$1,000,000 of the liabilities associated with the individual vessels actions,
mainly for sea pollution, are covered by P&I Club insurance.

12. Revenues

Revenues are comprised
of the following:

|                        |  |               |        |      |  |         |  |  |         | 
|----------------------- |  | ------------- | ------ | ---- |  | ------- |  |  | ------- | 
|                        |  | December
 31, |       
|                        |  |               |       
|                        |  | 2006          |        | 2007 |  | 2008    | 
|                        |  |               |        |      |  |         | 
|Time charter
 revenue   |  |               | 93,434 |      |  | 165,657 |  |  | 202,588 | 
|Voyage
 charter revenue |  |               | 1,243  |      |  |        |  |  |        | 
|Ballast
 bonus          |  |               | 50     |      |  | 535     |  |  | 2,765   | 
|Other income            |  |               | 4,313  |      |  | 5,865   |  |  | 3,058   | 
|                        |  |               |        |      |  |         |  |  |         | 
|Total                   |  |               | 99,040 |      |  | 172,057 |  |  | 208,411 | 
|                        |  |               |        |      |  |         |  |  |         | 

F-26

---



13. Vessel Operating
Expenses

Vessel
operating expenses are comprised of the following:

|                                           |  |               |        |      |  |        |  |  |        | 
|------------------------------------------ |  | ------------- | ------ | ---- |  | ------ |  |  | ------ | 
|                                           |  | December
 31, |       
|                                           |  |               |       
|                                           |  | 2006          |        | 2007 |  | 2008   | 
|                                           |  |               |        |      |  |        | 
|Crew wages
 and related costs              |  |               | 6,597  |      |  | 6,784  |  |  | 8,215  | 
|Insurance                                  |  |               | 1,307  |      |  | 1,388  |  |  | 2,138  | 
|Repairs,
 maintenance and drydocking costs |  |               | 534    |      |  | 324    |  |  | 2,211  | 
|Spares,
 stores and provisions             |  |               | 1,745  |      |  | 1,673  |  |  | 2,372  | 
|Lubricants                                 |  |               | 1,538  |      |  | 1,457  |  |  | 1,916  | 
|Taxes                                      |  |               | 461    |      |  | 247    |  |  | 116    | 
|Miscellaneous                              |  |               | 886    |      |  | 556    |  |  | 647    | 
|                                           |  |               |        |      |  |        |  |  |        | 
|Total                                      |  |               | 13,068 |      |  | 12,429 |  |  | 17,615 | 
|                                           |  |               |        |      |  |        |  |  |        | 

14. Derivatives

|    |                          
|--- | -------------------------
|(a) | Interest Rate Derivatives

The
Company has entered into the following interest rate swap transactions with
certain banks in respect to loans and credit facilities in order to manage
interest costs and the risk associated with changing interest rates with
respect to these loans and credit facilities.

|                         |  |                   |  |                   |  |            |   |                    |  |                    |  |  |  |         |  | 
|------------------------ |  | ----------------- |  | ----------------- |  | ---------- | - | ------------------ |  | ------------------ |  |  |  | ------- |  | 
|                         |  |                   |  |                   |  |            |   | Notional amount    | 
|                         |  |                   |  |                   |  |            |   |                    | 
|Loan or Credit
 Facility |  | Inception         |  | Expiry            |  | Swap
 Rate |   | December 31,
 2007 |  | December 31,
 2008 | 
|                         |  |                   |  |                   |  |            |   |                    |  |                    | 
|Kerasies                 |  | December 14, 2007 |  | December 14, 2010 |  | 4.0925     | % |                    |  | 40,000             |  |  |  | 38,400  |  | 
|Marindou                 |  | January 14, 2008  |  | January 14, 2013  |  | 3.950      | % |                    |  |                   |  |  |  | 41,250  |  | 
|Efragel                  |  | January 17, 2008  |  | January 17, 2013  |  | 3.650      | % |                    |  |                   |  |  |  | 41,250  |  | 
|Petra                    |  | February 19, 2008 |  | January 18, 2013  |  | 2.885      | % |                    |  |                   |  |  |  | 37,071  |  | 
|Pemer                    |  | March 7, 2008     |  | March 7, 2013     |  | 2.745      | % |                    |  |                   |  |  |  | 37,068  |  | 
|Marinouki                |  | March 19, 2008    |  | March 5, 2013     |  | 2.730      | % |                    |  |                   |  |  |  | 32,075  |  | 
|Avstes                   |  | April 25, 2008    |  | April 18, 2013    |  | 3.890      | % |                    |  |                   |  |  |  | 35,100  |  | 
|Pelea                    |  | December 15, 2008 |  | December 15, 2011 |  | 3.700      | % |                    |  |                   |  |  |  | 40,050  |  | 
|Soffive                  |  | November 20, 2008 |  | November 20, 2011 |  | 3.550      | % |                    |  |                   |  |  |  | 43,200  |  | 
|Eniaprohi                |  | November 13, 2008 |  | November 14, 2011 |  | 3.150      | % |                    |  |                   |  |  |  | 45,000  |  | 
|Staloudi                 |  | January 7, 2009   |  | January 7, 2012   |  | 3.385      | % |                    |  |                   |  |  |  | 54,780  |  | 
|                         |  |                   |  |                   |  |            |   |                    |  |                    |  |  |  |         |  | 
|Total                    |  |                   |  |                   |  |            |   |                    |  | 40,000             |  |  |  | 445,244 |  | 
|                         |  |                   |  |                   |  |            |   |                    |  |                    |  |  |  |         |  | 

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 on six-month intervals thereafter.

Under all of
the swap transactions described above except for Kerasies, the bank effects
semi-annual floating-rate payments to the Company for the relevant amount based
on the six month USD LIBOR and the Company effects semi-annual payments to the
bank on the relevant amount at the respective fixed rates. For Kerasies, the
bank effects quarterly floating-rate payments to the Company for the relevant
amount based on the six month USD LIBOR and the Company effects quarterly
payments to the bank on the relevant amount at the respective fixed rates.

The above
interest rate swap agreements did not meet hedge accounting criteria under SFAS
133 and as such are accounted for as trading derivatives. Under SFAS 133, the
fair market value of these derivatives are marked to market at the end of every
period and the resulting gain or loss during the period is recorded as Loss on
derivatives in the combined and consolidated statements of income. As at
December 31, 2007, and 2008, the fair values of

F-27

---



these
derivatives were a liability of $242 and $21,578 respectively and were recorded
as Derivative liabilities on the consolidated balance sheet.

|    |                             
|--- | ----------------------------
|(b) | Foreign Exchange Derivatives

The Company
enters 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. These foreign exchange forward contracts did not meet hedge accounting
criteria under SFAS 133.

The following
table presents the contract or notional amounts and the fair value amounts as
at December 31, 2007 and 2008 of the Companys foreign exchange forward
contracts, which were all held for trading purposes and were settled in
February 2009. The derivative contracts are executed in the over-the-counter
market.

|                                    |  |              |  |                                       | 
|----------------------------------- |  | ------------ |  | ------------------------------------- | 
|                                    |  | December 31, | 
|                                    |  |              | 
|                                    |  | 2007         |  | 2008                                  | 
|                                    |  |              |  |                                       | 
|Foreign
 exchange forward contracts |  |              |  |                                       | 
|Notional
 amount                    |  |             |  | 65,978                                | 
|Foreign
 currency and amount        |  |             |  | JPY 5.0
 billion and CHF 12.7 million | 
|Derivative
 assets                  |  |             |  | 1,377                                 | 
|Derivative
 liabilities             |  |             |  | 138                                   | 

15. Accrued
Liabilities

Accrued
liabilities are comprised of the following:

|                                                    |  |              |        |      |  |       | 
|--------------------------------------------------- |  | ------------ | ------ | ---- |  | ----- | 
|                                                    |  | December 31, |       
|                                                    |  |              |       
|                                                    |  | 2007         |        | 2008 | 
|                                                    |  |              |        |      | 
|Interest on
 long-term debt                         |  |              | 2,023  |      |  | 4,299 | 
|Early
 redelivery cost payable                      |  |              | 6,699  |      |  |      | 
|Vessels
 operating and voyage expenses             |  |              | 675    |      |  | 695   | 
|Commissions                                         |  |              | 75     |      |  | 230   | 
|Interest
 rate derivatives & other finance expenses |  |              |       |      |  | 303   | 
|General and
 administrative expenses                |  |              | 1,803  |      |  | 503   | 
|                                                    |  |              |        |      |  |       | 
|Total                                               |  |              | 11,275 |      |  | 6,030 | 
|                                                    |  |              |        |      |  |       | 

16. Early Redelivery
Cost

From time to
time, the Company incurs costs in connection with early redelivery of vessels
from charterers, where the contracted daily fixed charter rates are
substantially lower than the daily charter rates the vessels could potentially
earn in the current market. 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:

|          |  |                                |  |               |  |        |  |      |  
|--------- |  | ------------------------------ |  | ------------- |  | ------ |  | ---- | -
|          |  |                                |  | December
 31, | 
|          |  |                                |  |               | 
|Company   |  | Date of
 Termination Agreement |  | 2006          |  | 2007   |  | 2008 |  
|          |  |                                |  |               |  |        |  |      |  
|Staloudi  |  | March 9,
 2007                 |  |              |  | 14,382 |  |     |  
|Marinouki |  | October 17,
 2007              |  |              |  | 5,467  |  | (215 | )
|Kerasies  |  | September
 20, 2007            |  |              |  | 1,089  |  |     |  
|Petra     |  | March 7,
 2008                 |  |              |  |       |  | 780  |  
|Various   |  | Various                        |  | 150           |  | 500    |  |     |  
|          |  |                                |  |               |  |        |  |      |  
|Total     |  |                                |  | 150           |  | 21,438 |  | 565  |  
|          |  |                                |  |               |  |        |  |      |  

F-28

---



Details of the
first four transactions in the above table are as follows:

(a) On March
9, 2007, Staloudi, agreed with the charterers of the Stalo to terminate the $13.5
daily fixed rate time charter which had commenced on January 18, 2006 and was
not contractually due to expire until May 2011. The termination agreement with
the charterer provided for the following compensation: (a) cash payment to the
charterer of an amount of $3,375 upon termination of the time charter and
redelivery of the vessel and (b) chartering by the charterers of the Marina,
Sophiaand
Pedhoulas
Leader under time charters at below market rates for periods of 14.5
months from March 26, 2007, 14.5 months from June 28, 2007 and 7.3 months from
March 1, 2007, respectively. The impact of chartering these three vessels at
below market rates for the agreed periods was determined to be $11,007 and was
recorded as Time charter discount within the consolidated balance sheet. Time
charter discount represents the difference between the contracted charter rate
contracted for each of the three vessels (all below market) and the prevailing
market charter rate at the time the early termination agreement with the
charterer of the vessel, the Stalo, was entered into. When establishing
prevailing market rates, the Company utilizes the industry standard published
daily charter rate (before commissions) for a Panamax class vessel, as its size
is the closest comparison available to the Companys vessels. The published
daily charter rate is then adjusted upwards to reflect the higher cargo
capacity of the Companys vessels, and may be adjusted, if necessary, to
reflect a later inception date, or changes in the market. For purposes of
calculating the Time charter discount, the difference between the prevailing market
daily charter rate and the contracted daily charter rate was applied to the
total charter days outstanding for each of the three vessels, the Marina,
Sophia
and Pedhoulas
Leader, to arrive at a Time charter discount in the amount of
$11,007.

The calculations
described above were applied to determine the prevailing market rate for both
the Marina
and the Sophia,
as neither vessel was subject to a recent charter agreement whereby a
prevailing market rate would have been established. However, the Pedhoulas
Leader was previously subject to a charter partner agreement with
the charterer on February 13, 2007. On March 1, 2007, the Pedhoulas Leader, a
newbuild, was delivered from a shipyard and commenced the time charter with the
charterer. On March 9, 2007, in connection with the early termination of the
charter for the vessel Stalo, an addendum to the existing charter
party was entered into reducing the daily charter rate and extending the
charter period. Accordingly, the rate established on February 13, 2007 was
utilized as the prevailing market rate and a new calculation of prevailing
market charter rate was not required.

The aggregate
early redelivery cost amounted to $14,382, which was comprised of the $3,375
cash payment and the $11,007 impact of chartering the three vessels at below
market rates, with a corresponding recognition of Time charter discount of
$11,007. The Time charter discount is recorded as a long-term liability in the
consolidated balance sheet, and is being amortized on a straight-line basis to
Revenue over the duration of the respective below market time charters. As at
December 31, 2007, accumulated amortization amounted to $8,241 resulting in a
remaining Time charter discount of $2,766, which amount was amortized in 2008.

(b) On October
17, 2007, Marinouki, agreed with the charterers of the Marina to terminate the
$25.0 daily fixed rate time charter which had commenced on March 26, 2007, as
part of the transaction described in item (a) above, and was not contractually
due to expire until June 3, 2008. As compensation for early redelivery,
Marinouki agreed to pay the charterers an amount equal to $57.75 per day from
the date of redelivery through May 22, 2008. Such earlier redelivery was
expected to occur in the first quarter of 2008, and the expected compensation
amount to be paid to the charterers is $6,699. This amount was reduced by
$1,232 which was the expected remaining unamortized portion of the deferred
Time charter discount of the Marina under the transaction discussed in
item (a) above from the expected date of delivery until June 3, 2008; hence the
Early redelivery cost recorded in the year ended December 31, 2007 amounted to
$5,467. The Marina
was actually redelivered on January 30, 2008, and as a result the Early
redelivery cost was reduced by $215 in 2008.

(c) On
September 20, 2007, Kerasies agreed with the charterers of the Katerina
to terminate the $23.125 daily fixed rate time charter which had commenced on
August 9, 2006, and was not contractually due to expire until November 9, 2007.
As compensation for early redelivery, Kerasies agreed to pay the charterers an
amount of $1,089.

(d) 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.

F-29

---



17. 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) with an
initial or remaining charter period in excess of one year as of December 31,
2008 are as follows:

|              |  |  |         | 
|------------- |  |  | ------- | 
|December
 31, |  |  |         | 
|              |  |  |        
|2009          |  |  | 153,387 | 
|2010          |  |  | 131,629 | 
|2011          |  |  | 88,556  | 
|2012          |  |  | 75,437  | 
|2013          |  |  | 60,938  | 
|Thereafter    |  |  | 47,812  | 
|              |  |  |         | 
|Total         |  |  | 557,759 | 
|              |  |  |         | 

Future minimum
time charter revenue excludes the future acquisitions of the vessels discussed
in Note 11, 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.

18. General and
Administrative Expenses

General and
administrative expenses for the years ended December 31, 2006, 2007 and 2008
were as follows:

|                                |  |              |  |       |  |       | 
|------------------------------- |  | ------------ |  | ----- |  | ----- | 
|                                |  | December 31, | 
|                                |  |              | 
|                                |  | 2006         |  | 2007  |  | 2008  | 
|                                |  |              |  |       |  |       | 
|Management
 fees- related party |  | 1,006        |  | 1,177 |  | 4,420 | 
|Legal fees
 and expenses        |  |             |  | 1,199 |  | 1,784 | 
|Accountants
 fees & expenses    |  |             |  | 1,201 |  | 872   | 
|Directors
 fees                 |  |             |  |      |  | 90    | 
|Listing fees
 and expenses      |  |             |  | 21    |  | 419   | 
|Investor
 relation expenses     |  |             |  |      |  | 89    | 
|Miscellaneous                   |  |             |  | 56    |  | 371   | 
|                                |  |              |  |       |  |       | 
|Total                           |  | 1,006        |  | 3,654 |  | 8,045 | 
|                                |  |              |  |       |  |       | 

19. 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, |      
|                                                                     |  |              |      
|                                                                     |  | 2007         |       | 2008 | 
|                                                                     |  |              |       |      | 
|Unearned Revenue                                                     |  |              |       |      |  |        | 
|Revenue received in advance of service
 provided  Current liability |  |              | 4,127 |      |  | 6,378  | 
|Deferred revenue resulting from varying
 charter rates               |  |              |       |      |  |        | 
|Current liability                                                    |  |              |      |      |  | 2,073  | 
|Non-current liability                                                |  |              |      |      |  | 11,765 | 
|                                                                     |  |              |       |      |  |        | 
|Total Unearned Revenue                                               |  |              | 4,127 |      |  | 20,216 | 
|                                                                     |  |              |       |      |  |        | 
|                                                                     |  |              |       |      |  |        | 
|Accrued Revenue                                                      |  |              |       |      |  |        | 
|Resulting from varying charter rates
 Current asset                 |  |              |      |      |  | 3,938  | 
|                                                                     |  |              |       |      |  |        | 

F-30

---



20. Gain On Sale Of
Assets

The Company
concluded the following sales of vessels in order to take advantage of the
increase in vessel prices at that time:

During the
year ended December 31, 2006

|                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---------------------------------------- | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                         |  | The sale of
 the Old
 Sophia and the Pelopidas to unrelated third parties.
 MOAs with respect to each of their sales were entered into on March 27, 2006
 and August 17, 2006, respectively, and the vessels were delivered to the
 respective buyers on April 11, 2006 and November 30, 2006 respectively. The
 vessels were sold for gross proceeds of $33,900 and $44,150, respectively.
 These sales realized a net gain of $14,043 and $22,972, respectively, after
 taking into account commissions and other directly related expenses amounting
 to $346 and $1,328, respectively, and the net book value of other assets on
 board the vessels of $52.                                                                                   
|                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|During the
 year ended December 31, 2007
|                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                         |  | The sale of
 two vessels under construction, the Pedhoulas Farmer and the Pedhoulas
 Fighter, to unrelated third parties for gross consideration of
 $59,000 per vessel. MOAs with respect to each of their sales were both
 entered into on October 10, 2006. The completed vessels were delivered
 to their respective buyers on January 9, 2007 and January 26, 2007,
 respectively. The resulting gain from the sale of the above vessels was
 $22,467 and $29,788, respectively, after taking into account commissions and
 other directly related expenses amounting to $1,195 and $1,164 respectively.                                                                                                                                     
|                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                         |  | The sale of
 the vessels Kanaris and Old Eleni to unrelated third parties for
 gross consideration of $47,300 and $54,900, respectively. MOAs with respect
 to each of their sales were entered in on September 25, 2006 and
 November 17, 2006, respectively. These sales realized a net gain of
 $26,925 and $33,180, respectively, after taking into account commissions and
 other directly related expenses amounting to $775 for each vessel and the net
 book value of the other assets on board the vessels of $41. The vessels were
 delivered to the buyers on February 20, 2007 and March 26, 2007,
 respectively. The Kanaris and Old Eleni were classified
 as Assets held for sale as of December 31, 2006 in the amount of $40,504.

21. Fair Value of
Financial Instruments

The carrying
values of trade accounts receivable cash and cash equivalents, time deposits,
restricted cash and accounts payable are reasonable estimates of their fair
value due to the short-term nature of these financial instruments. The fair
value of the floating rate debt (loan and credit facilities) approximates the
carrying value, due to their variable interest rates.

The fair value
of the interest rate and currency swaps is the estimated amount the Company
would pay or receive to terminate the swap agreements at the reporting date,
taking into account current LIBOR swap interest rates and the creditworthiness
of the swap counterparty. 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 as defined in SFAS No. 157
Fair Value Measurements. The following table summarizes the valuation of our
financial instruments as of December 31, 2008.

|                                             |  |                                                |       |  |  |        | 
|-------------------------------------------- |  | ---------------------------------------------- | ----- |  |  | ------ | 
|                                             |  | Significant Other Observable Inputs
 (Level 2) |       |  | 
|                                             |  |                                                | Total | 
|                                             |  |                                                |       |  | 
|Derivative
 instruments  asset position     |  | 1,377                                          |       |  |  | 1,377  | 
|Derivative
 instruments  liability position |  | 21,716                                         |       |  |  | 21,716 | 

F-31

---



As of December
31, 2008, no fair value measurements for assets or liabilities under Level 1 or
Level 3 were recognized in the Companys consolidated balance sheet. The
Companys interest rate derivative instruments, are pay-fixed, receive-variable interest rate
swaps based on the USD LIBOR swap rate. This rate is observable at
commonly quoted intervals for the full term of the swaps and therefore is
considered a Level 2 item. In addition, the Companys outstanding
derivative instruments as of December 31, 2008 include forward currency
contracts for JPY and CHF, which are observable at commonly quoted intervals
for the full term of the swaps and therefore are considered a Level 2
item. SFAS No. 157 states that the fair value measurement of a liability
must reflect the nonperformance risk of the entity. Therefore, the impact of
the Companys creditworthiness has also been factored into the fair value
measurement of the derivative instruments in a liability position.

22. Dividends

On
March 28, 2008, the Company declared an aggregate dividend of $147,770 to
all shareholders of record as of March 31, 2008.

On May 27,
2008, the Board of Directors declared an aggregate dividend of $27,620 to all
shareholders of record as of May 28, 2008.

On August 11,
2008, the Board of Directors declared a dividend of $0.1461 per common share,
which resulted in an aggregate dividend of $7,962 to all shareholders of record
as of August 22, 2008.

On
October 31, 2008, the Board of Directors declared a dividend of $0.475 per
common share, which resulted in an aggregate dividend of $25,888 to all
shareholders of record as of November 21, 2008.

23. Earnings per
Share

The
computation of basic earnings per share is based on the weighted average number
of common shares outstanding during the year gives retroactive effect to the
shares issued to Vorini Holdings, Inc. in connection with the initial public
offering and includes the shares issuable to Mr. Frank Sica at the end of the
year for services rendered. Diluted earnings per share is the same as basic
earnings per share. There are no other potentially dilutive shares.

24. Subsequent Events

(a) Dividend
Declaration:

On February 9,
2009, the Board of Directors declared a dividend of $0.15 per common share
totaling $8,176 to all shareholders of record as of February 20, 2009.

On May 6,
2009, the Board of Directors declared a dividend of $0.15 per common share
totaling $8,176 to all shareholders of record as of May 22, 2009, payable on or
about May 29, 2009.

(b) Vessel delivery
and credit facility drawing:

On February
12, 2009, Eniadefhi took delivery from the shipyard of its newbuild, a Post-Panamax
class vessel, named Martine, and made drawings totaling $40,000 from the
Eniadefhi credit facility, discussed in Note 11(a).

(c) Vessel early
redelivery:

On February
26, 2009, Efragel agreed with the charterers of the Efrossini to terminate the
time charter agreement which had commenced on February 23, 2008, and was not
contractually due to expire until January 8, 2011, which would have generated
approximately $35,703 in future time charter hire, net of commissions. As
compensation for early redelivery, Efragel received from the charterers an
amount of $25,480, net of commissions. The vessel was redelivered to the
Company on March 15, 2009 and since then has been employed in the spot market.

On April 30,
2009, Pelea agreed with the charterers of the Pedhoulas Leader to
terminate the time charter agreement which had commenced on December 22, 2007
and was not contractually due to expire until November 22, 2009, which
would have generated approximately $5,048 in future time charter hire, net of
commissions. The vessel is

F-32

---



expected to be
redelivered to the Company in the period from June 15, 2009 to July 15, 2009.
As compensation for early redelivery, the charterers agreed to pay Pelea an
amount between $2,766 and $3,436 depending on the actual redelivery date.

On April 30,
2009, Marindou agreed with the charterers of the Maria to terminate the time
charter agreement which had commenced on February 2, 2008, and was not
contractually due to expire until January 3, 2011, which would have
generated approximately $25,035 in future time charter hire, net of
commissions. The vessel is expected to be redelivered to the Company in the
period from June 15, 2009 to July 15, 2009. As compensation for early
redelivery, the charterers agreed to pay Marindou an amount between $15,169 and
$16,114 depending on the actual redelivery date.

On April
30,2009, Kerasies agreed with the charterers of the Katerina to terminate the
time charter agreement which had commenced on January 27, 2009, and was not
contractually due to expire until November 26, 2010, which would have generated
approximately $30,872 in future time charter hire, net of commissions. The
vessel is expected to be redelivered to the Company in the period from June 15,
2009 to July 15, 2009. As compensation for early redelivery, the charterers
agreed to pay Kerasies an amount between $20,673 and $22,347 depending on the
actual redelivery date.

(d) Interest
rates derivatives:

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | i.  | On March 30,
 2009, the Company agreed with the respective bank to reduce the notional
 amounts and modify the contractual reduction amounts of the notional amounts
 of five interest rate swap transactions in an aggregate amount of $15,400, so
 that the notional amounts would be in line with the expected principal
 outstandings under the respective facilities, following the expected loan
 prepayments as described in Note 8.                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | The amounts
 by which the notional amounts were reduced as described above were novated to
 Eniadefhi.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ii. | On March 30,
 2009, the Company entered into an interest rate swap transaction with the
 relevant bank with respect to the Eniadefhi credit facility in order to
 manage interest costs and the risk associated with changing interest rates
 with respect to this credit facility. The initial notional amount of the
 interest rate swap transaction is $40,000, and this reduces during the term
 of the swap transaction based on the expected principal outstanding under the
 Eniadefhi credit facility. The swap transaction has been effective from April
 1, 2009 and expires on February 12, 2014.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | Under the swap
transaction, the bank will make semi-annual floating-rate payments to the
Company for the relevant amount based on the six month USD LIBOR and the
Company will make semi-annual payments to the bank using the swap rate of 3.35%
p.a., which was calculated taking into account the novations described in item
(i) above.                                                                                                                                                                                                                                                                 

The above
interest rate swap agreement does not qualify for hedge accounting under SFAS
133.

(e) Cancellation
of vessel acquisitions:

On April 30, 2009, each of
Maxdeka and Maxenteka signed an agreement with the third party seller, whereby
it was agreed to cancel the contract for the acquisition of the Maxdeka and
Maxenteka newbuilds respectively, and each agreed to forfeit the advance
deposit paid of $7,212 per newbuild.

As a result of these subsequent
events, the Companys commitments under shipbuilding contracts and MOAs as
disclosed in the table in Note 11(b) are reduced by $89,576 Due to
Shipyards/Sellers in 2010 and by $375 Due to Manager in 2009 and $1,415 Due to
Manager in 2010.

F-33

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