|                                  
|----------------------------------
|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, 2009
|           |                                                                                                                                   
|o          | Transition
 Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934                                         
|           |                                                                                                                                   
|o          | Shell
 Company Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
 of 1934                                     

|                                                                                 
|---------------------------------------------------------------------------------
|Commission
File Number 001-34077                                                 
|                                                                                 
|SAFE BULKERS, INC.                                                               
|(Exact name of Registrant as specified in its charter)                           
|                                                                                 
|Not Applicable                                                                   
|(Translation of Registrants name into English)                                  
|                                                                                 
|Republic of The Marshall Islands                                                 
|(Jurisdiction
 of incorporation or organization)                                 
|                                                                                 
|30-32
 Avenue Karamanli                                                          
|P.O.
 Box 70837                                                                  
|16605
 Voula                                                                     
|Athens,
 Greece                                                                  
|(Address of
 principal executive offices)                                        
|                                                                                 
|Dr.
 Loukas Barmparis                                                            
|President                                                                        
|30-32
 Avenue Karamanli                                                          
|P.O.
 Box 70837                                                                  
|16605
 Voula                                                                     
|Athens,
 Greece                                                                  
|Telephone : +30 210 899 4980                                                     
|Facsimile
 : +30 210 895 4159                                                    
|(Name,
 Address, Telephone Number and Facsimile Number of Company contact person)
|                                                                                 
|Securities
registered or to be registered pursuant to Section 12(b) of the Act:  

|                                          |  |                                          
|----------------------------------------- |  | -----------------------------------------
|Title of Each Class                       |  | Name of Each Exchange on Which Registered
|                                          |  |                                          
|Common
 Stock, $0.001 par value per share |  | 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, 2009, there were 54,512,931 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 fileroAccelerated fileroNon-accelerated filerx

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

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

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

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

---



TABLE OF CONTENTS

|                              |                                                                               |     
|----------------------------- | ----------------------------------------------------------------------------- | ----
|                              |                                                                               | Page
|                              |                                                                              
|ABOUT THIS REPORT             | ii                                                                           
|FORWARD-LOOKING
 STATEMENTS   | ii                                                                           
|                              |                                                                              
|PART I                        |                                                                               | 1   
|                              |                                                                               |     
|ITEM 1.                       | IDENTITY
 OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        | 1   
|ITEM
 2.                      | OFFER
 STATISTICS AND EXPECTED TIMETABLE                                      | 1   
|ITEM
 3.                      | KEY
 INFORMATION                                                              | 1   
|ITEM
 4.                      | INFORMATION
 ON THE COMPANY                                                   | 18  
|ITEM
 4A.                     | UNRESOLVED
 STAFF COMMENTS                                                    | 30  
|ITEM
 5.                      | OPERATING
 AND FINANCIAL REVIEW AND PROSPECTS                                 | 30  
|ITEM 6.                       | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    | 44  
|ITEM 7.                       | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                             | 48  
|ITEM 8.                       | FINANCIAL INFORMATION                                                         | 52  
|ITEM 9.                       | THE OFFER AND LISTING                                                         | 53  
|ITEM 10.                      | ADDITIONAL INFORMATION                                                        | 53  
|ITEM 11.                      | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                    | 66  
|ITEM 12.                      | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                        | 66  
|                              |                                                                               |     
|PART II                       |                                                                               | 67  
|                              |                                                                               |     
|ITEM 13.                      | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                               | 67  
|ITEM 14.                      | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
 PROCEEDS | 67  
|ITEM 15.                      | CONTROLS AND PROCEDURES                                                       | 67  
|ITEM 16A.                     | AUDIT COMMITTEE FINANCIAL EXPERT                                              | 69  
|ITEM 16B.                     | CODE OF ETHICS                                                                | 69  
|ITEM 16C.                     | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                        | 69  
|ITEM 16D.                     | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                    | 69  
|ITEM 16E.                     | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
 PURCHASERS       | 70  
|ITEM 16F.                     | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT                                  | 70  
|ITEM 16G.                     | CORPORATE GOVERNANCE                                                          | 70  
|                              |                                                                               |     
|PART III                      |                                                                               | 72  
|                              |                                                                               |     
|ITEM 17.                      | FINANCIAL STATEMENTS                                                          | 72  
|ITEM 18.                      | FINANCIAL STATEMENTS                                                          | 72  
|ITEM 19.                      | EXHIBITS                                                                      | 72  
|                             
|INDEX TO FINANCIAL STATEMENTS | F-1                                                                          

---



ABOUT THIS REPORT

In
this annual report, Safe Bulkers, the Company, we, us and our are
sometimes used for convenience where references are made to Safe Bulkers, Inc.
and its subsidiaries and the six Additional Companies, as defined in Note 1 to
the financial statements included in this annual report (as well as the predecessors of the
foregoing). These expressions are also used where no useful purpose is served
by identifying the particular company or companies. Our affiliated
management company, Safety Management Overseas S.A., a company incorporated
under the laws of the Republic of Panama, is sometimes referred to in this
annual report as Safety Management or our Manager.

FORWARD-LOOKING STATEMENTS

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

Forward-looking
statements include, but are not limited to, such matters as:

| |   |                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | future
 operating or financial results and future revenues and expenses;                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                
| |  | future,
 pending or recent acquisitions, business strategy, areas of possible
 expansion and expected capital spending or operating expenses;                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                
| |  | availability
 of key employees, crew, length and number of off-hire days, drydocking
 requirements and fuel and insurance costs;                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                
| |  | general
 market conditions and shipping industry trends, including charter rates,
 vessel values and factors affecting supply and demand;                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                
| |  | our
 financial condition and liquidity, including our ability to make required
 payments under our credit facilities, comply with our loan covenants and
 obtain additional financing in the future to fund capital expenditures,
 acquisitions and other corporate activities;
| |   |                                                                                                                                                                                                                                                                                
| |  | the overall
 health and condition of the U.S. and global financial markets, including the
 value of the U.S. dollar relative to other currencies;                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                
| |  | our
 expectations about availability of vessels to purchase, the time that it may
 take to construct and deliver new vessels or the useful lives of our vessels;                                                                                                               
| |   |                                                                                                                                                                                                                                                                                
| |  | our
 continued ability to enter into period time charters with our customers and
 secure profitable employment for our vessels in the spot market;                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                
| |  | our
 expectations relating to dividend payments and ability to make such payments;                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                
| |  | our ability
 to leverage 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 terrorism, piracy and discharge of
 pollutants;                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                
| |  | potential
 liability from future litigation; and                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                
| |  | other
 factors discussed in Item 3. Key Information  D. Risk Factors of this
 annual report.                                                                                                                                                                                

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

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

ii

---



PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY 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 five years in the five year period
ended December 31, 2009. 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, 2007, 2008 and 2009 and the
consolidated balance sheets at December 31, 2008 and 2009, 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 |            | 2009 |  
|                                                                 |  |                                                   |            |      |   |            |   |      |            |      |  
|                                                                 |  | (In thousands of U.S. dollars
 except share data) |           
|STATEMENT OF INCOME                                              |  |                                                   |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Revenues                                                         |  | $                                                 | 82,877     |      | $ | 99,040     |   | $    | 172,057    |      | $ | 208,411    |   | $ | 168,400    |  
|Commissions                                                      |  |                                                   | (3,211     | )    |   | (3,731     | ) |      | (6,209     | )    |   | (7,639     | ) |   | (3,794     | )
|                                                                 |  |                                                   |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Net revenues                                                     |  |                                                   | 79,666     |      |   | 95,309     |   |      | 165,848    |      |   | 200,772    |   |   | 164,606    |  
|                                                                 |  |                                                   |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Voyage expenses                                                  |  |                                                   | (228       | )    |   | (420       | ) |      | (179       | )    |   | (273       | ) |   | (577       | )
|Vessel operating expenses                                        |  |                                                   | (10,366    | )    |   | (13,068    | ) |      | (12,429    | )    |   | (17,615    | ) |   | (19,628    | )
|Depreciation                                                     |  |                                                   | (7,610     | )    |   | (9,553     | ) |      | (9,583     | )    |   | (10,614    | ) |   | (13,893    | )
|General and administrative expenses                             |  |                                                   |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Management fee to related party                                  |  |                                                   | (803       | )    |   | (1,006     | ) |      | (1,177     | )    |   | (4,420     | ) |   | (4,436     | )
|Third party expenses                                             |  |                                                   |           |      |   |           |   |      | (2,477     | )    |   | (3,625     | ) |   | (2,610     | )
|Early redelivery cost                                            |  |                                                   |           |      |   | (150       | ) |      | (21,438    | )    |   | (565       | ) |   | 74,951     |  
|Loss on asset purchase cancellations                             |  |                                                   |           |      |   |           |   |      |           |      |   |           |   |   | (20,699    | )
|                                                                 |  |                                                   |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Gain on sale of assets                                           |  |                                                   | 26,785     |      |   | 37,015     |   |      | 112,360    |      |   |           |   |   |            |  
|                                                                 |  |                                                   |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Operating income                                                 |  |                                                   | 87,444     |      |   | 108,127    |   |      | 230,925    |      |   | 163,660    |   |   | 177,714    |  
|                                                                 |  |                                                   |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Interest expense                                                 |  |                                                   | (3,668     | )    |   | (6,140     | ) |      | (8,225     | )    |   | (16,392    | ) |   | (10,342    | )
|Other finance costs                                              |  |                                                   | (124       | )    |   | (116       | ) |      | (161       | )    |   | (408       | ) |   | (442       | )
|Interest income                                                  |  |                                                   | 692        |      |   | 775        |   |      | 1,290      |      |   | 1,492      |   |   | 2,164      |  
|Loss on derivatives                                              |  |                                                   | (3,171     | )    |   | (1,963     | ) |      | (704       | )    |   | (19,509    | ) |   | (4,416     | )
|Foreign currency gain/(loss)                                     |  |                                                   | 13,477     |      |   | (3,279     | ) |      | (13,759    | )    |   | (9,501     | ) |   | 838        |  
|Amortization and write-off of deferred
 finance charges          |  |                                                   | (63        | )    |   | (180       | ) |      | (166       | )    |   | (131       | ) |   | (106       | )
|                                                                 |  |                                                   |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Net income                                                       |  | $                                                 | 94,587     |      | $ | 97,224     |   | $    | 209,200    |      | $ | 119,211    |   | $ | 165,410    |  
|                                                                 |  |                                                   |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Earnings per share, basic and diluted                            |  | $                                                 | 1.74       |      | $ | 1.78       |   | $    | 3.84       |      | $ | 2.19       |   | $ | 3.03       |  
|Cash dividends declared per share                                |  |                                                   |           |      |   |           |   | $    | 7.04       |      | $ | 3.83       |   | $ | 0.60       |  
|Weighted average number of shares outstanding, basic and diluted |  |                                                   | 54,500,000 |      |   | 54,500,000 |   |      | 54,500,000 |      |   | 54,500,889 |   |   | 54,510,587 |  

1

---



|                                                      |  |                                                   |         |      |   |         |   |      |          |      |   |          |   |   |          |  
|----------------------------------------------------- |  | ------------------------------------------------- | ------- | ---- | - | ------- | - | ---- | -------- | ---- | - | -------- | - | - | -------- | -
|                                                      |  | Year Ended December 31,                           |        
|                                                      |  |                                                   |        
|                                                      |  | 2005                                              |         | 2006 |   | 2007    |   | 2008 |          | 2009 |  
|                                                      |  |                                                   |         |      |   |         |   |      |          |      |  
|                                                      |  | (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  |   | $ | 211,338  |  
|Net cash (used in)/provided by investing
 activities  |  |                                                   | (6,065  | )    |   | (33,835 | ) |      | 88,416   |      |   | (148,223 | ) |   | (191,863 | )
|Net cash provided by/(used in) financing
 activities  |  |                                                   | 28,414  |      |   | 46,641  |   |      | (366,922 | )    |   | (83,672  | ) |   | (28,742  | )
|Net increase/(decrease) in cash and cash
 equivalents |  |                                                   |        |      |   |        |   |      |         |      |   | 27,702   |   |   | (9,267   | )
|                                                      |  |                                                   |         |      |   |         |   |      |          |      |   |          |   |   |          |  
|                                                      |  | As of December 31,                                |        
|                                                      |  |                                                   |        
|                                                      |  | 2005                                              |         | 2006 |   | 2007    |   | 2008 |          | 2009 |  
|                                                      |  |                                                   |         |      |   |         |   |      |          |      |  
|BALANCE SHEET DATA                                    |  |                                                   |         |      |   |         |   |      |          |      |   |          |   |   |          |  
|Total current assets                                  |  | $                                                 | 159,538 |      | $ | 282,021 |   | $    | 98,883   |      | $ | 88,086   |   | $ | 105,648  |  
|Total fixed assets                                    |  |                                                   | 232,655 |      |   | 253,448 |   |      | 308,340  |      |   | 387,296  |   |   | 467,513  |  
|Other non-current assets                              |  |                                                   | 405     |      |   | 314     |   |      | 434      |      |   | 6,900    |   |   | 55,563   |  
|Total assets                                          |  |                                                   | 392,598 |      |   | 535,783 |   |      | 407,657  |      |   | 482,282  |   |   | 628,724  |  
|Total current liabilities                             |  |                                                   | 111,271 |      |   | 172,275 |   |      | 43,984   |      |   | 70,863   |   |   | 65,551   |  
|Derivative liabilities                                |  |                                                   |        |      |   |        |   |      | 242      |      |   | 21,716   |   |   | 15,510   |  
|Long-term debt, net of current portion                |  |                                                   | 149,500 |      |   | 134,457 |   |      | 306,267  |      |   | 413,483  |   |   | 420,994  |  
|Time charter discount                                 |  |                                                   |        |      |   |        |   |      | 2,766    |      |   |         |   |   |         |  
|Unearned revenueLong-term                            |  |                                                   |        |      |   |        |   |      |         |      |   | 11,765   |   |   | 29,450   |  
|Total owners/shareholders
 equity/(deficit)         |  |                                                   | 131,827 |      |   | 229,051 |   |      | 54,398   |      |   | (35,545  | ) |   | 97,219   |  
|Total liabilities and owners/shareholders
 equity   |  |                                                   | 392,598 |      |   | 535,783 |   |      | 407,657  |      |   | 482,282  |   |   | 628,724  |  

B. Capitalization and Indebtedness

Not
applicable.

C. Reasons for the Offer and Use of Proceeds

Not
applicable.

D. Risk Factors

Risks Inherent in Our Industry and Our
Business

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

The drybulk
shipping industry is cyclical with attendant volatility in charter rates,
vessel values and profitability. For example, the degree of charter hire rate
volatility among different types of drybulk carriers has varied widely. After
reaching historical highs in mid-2008, charter hire rates for Panamax and
Capesize drybulk carriers reached near historically low levels at the end of
2008, and have since recovered somewhat. Because from time to time we may
charter some of our vessels pursuant to short-term time charters, we may be
exposed to changes in spot market and short-term charter rates for drybulk
carriers and such changes may affect our earnings and the value of our drybulk
carriers at any given time. Although at January 31, 2010, 11 of our 13 drybulk
vessels were deployed or scheduled to be deployed on period time charters with
more than one year of remaining term, if low charter rates in the drybulk
market prevail during periods when we must replace our existing charters, it
will have an adverse effect on our revenues, profitability, cash flows and our
ability to comply with the financial covenants in our loan agreements. In
addition, we have contracted to acquire six newbuilds scheduled to be delivered
through 2012, three of which do not currently have contracted charters. We may
be unable to successfully charter our vessels in the future or renew existing
charters at rates sufficient to allow us to meet our obligations or pay any
dividends.

2

---



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

Factors that
influence demand for vessel capacity include:

| |   |                                                          
| | - | ---------------------------------------------------------
| |  | demand for
 and production of drybulk products;          
| |   |                                                          
| |  | global and
 regional economic and political conditions;  
| |   |                                                          
| |  | environmental
 and other regulatory developments;        
| |   |                                                          
| |  | the distance
 drybulk cargoes are to be moved by sea; and
| |   |                                                          
| |  | changes in
 seaborne and other transportation patterns.  

Factors that
influence the supply of vessel capacity include:

| |   |                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the number
 of newbuild deliveries, which among other factors relates to the ability of
 shipyards to deliver newbuilds by contracted delivery dates and the ability
 of purchasers to finance such newbuilds;
| |   |                                                                                                                                                                                                               
| |  | the
 scrapping rate of older vessels;                                                                                                                                                                         
| |   |                                                                                                                                                                                                               
| |  | port and
 canal congestion;                                                                                                                                                                                   
| |   |                                                                                                                                                                                                               
| |  | the number
 of vessels that are in or out of service, including due to vessel casualties;
 and                                                                                                                
| |   |                                                                                                                                                                                                               
| |  | changes in
 environmental and other regulations that may limit the useful lives of
 vessels.                                                                                                                  

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

While the drybulk
carrier charter market has recently strengthened, it remains significantly
below its high in 2008, which has and may continue to adversely affect our
revenues, earnings and profitability and our ability to comply with our loan
covenants.

The revenues,
earnings and profitability of companies in our industry are affected by the
charter rates that can be obtained in the market, which is volatile and has
experienced significant declines since its highs in the middle of 2008. For
example, the Baltic Drybulk Index, or BDI, declined from a high of 11,793 in
May 2008 to a low of 663 in December 2008, which represents a decline of 94%
within a single calendar year. The BDI fell over 70% during October 2008 alone.
During 2009, the BDI remained volatile, reaching a low of 772 on January 5,
2009 and a high of 4,661 on November 19, 2009. The decline and volatility in
charter rates has been due to various factors, including the lack of trade financing
for purchases of commodities carried by sea, which has resulted in a
significant decline in cargo shipments (which has since recovered somewhat),
and the excess supply of iron ore in China, which has resulted in falling iron
ore prices and increased stockpiles in Chinese ports. The decline and
volatility in charter rates in the drybulk market also affects the value of our
drybulk vessels, which follows the trends of drybulk charter rates, and
earnings on our charters, and similarly affects our cash flows, liquidity and
compliance with the covenants contained in our loan agreements.

While there are
certain signs that the economic recession has ended in certain countries, there
is still considerable instability in the world economy, which could initiate a
new economic downturn, or introduce volatility in the global markets. A global
economic downturn, or volatility in the global markets, 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 past
years, China and India have had two of the worlds fastest growing economies in
terms of gross domestic product and have been the main driving force behind
increases in marine drybulk trade and the demand for drybulk vessels. If
economic growth declines in China, Japan, India and other countries in the
Asia-Pacific region, we may face decreases in such drybulk trade and demand.
Moreover, a slowdown in the United States and Japanese economies or the
economies of the European Union or certain Asian countries will likely
adversely affect economic growth in China, India and elsewhere. Such an
economic downturn in any of these countries could have a material adverse
effect on our business, financial condition and results of operations.

3

---



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

The market
supply of drybulk vessels has been increasing, and the number of drybulk
vessels on order is near historic highs. As of December 31, 2009, newbuild
orders had been placed for an aggregate of approximately 61%of the then-existing
global drybulk fleet, with deliveries expected mainly during the succeeding 36
months, although available data with regard to cancellations of existing
newbuild orders or delays of newbuild deliveries are not always accurate. We
have also seen fewer vessels being scrapped at levels observed during the
economic crisis because of the increased charter rates that were paid during
the second half of 2009. As a result, the drybulk fleet remains an aged fleet
that has not decreased in number. An oversupply 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 on acceptable terms, we may have to secure charters in the
spot market, where charter rates are more volatile and revenues are, therefore,
less predictable, or we may not be able to charter our vessels at all. One vessel
in our current fleet will be available for employment in the first quarter of
2010 and we have not yet arranged charters for two of our newbuild vessels
scheduled to be delivered to us within 2010. In addition, a material increase
in the net supply of drybulk vessel capacity without corresponding growth in
drybulk vessel demand could have a material adverse effect on our fleet
utilization and our charter rates generally, and could, accordingly, materially
adversely affect our business, financial condition and results of operations.

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

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

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

We were in
compliance with our covenants as of December 31, 2009. However, as of December
31, 2008, we were in breach of certain covenants relating to the maintenance of
minimum security vessel values under certain credit facilities. Subsequently we
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 prepaid certain loan amounts on
various dates between December 14, 2008 and July 17, 2009 which totaled $23.4
million. The waivers we obtained, which covered any breach under the corporate
guarantee of six of our loan agreements, will expire on March 31, 2010. If
these waivers had not been in place as of December 31, 2009, we still would
have been in compliance with the relevant covenants as of that date. However,
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. As a
result of cross-default provisions contained in our loan agreements, this could
in turn lead to additional defaults under our loan agreements and the
consequent acceleration of the indebtedness thereunder and the commencement of
similar foreclosure proceedings by other lenders. If our indebtedness were
accelerated in full or in part, it would be difficult in the current financing
environment for us to refinance our debt or obtain additional financing and we
could lose our vessels if our lenders foreclose their liens, which would
adversely affect our ability to continue our business.

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

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

4

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Rising crew costs
may adversely affect our profits.

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

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

Our business
and the operation of our vessels are regulated under international conventions,
national, state and local laws and regulations in force in the jurisdictions in
which our vessels operate, as well as in the country or countries of their
registration, in order to protect against potential environmental impacts.
Government regulation of vessels, particularly in the area of environmental
requirements, can be expected to become more stringent in the future and could
require us to incur significant capital expenditures on our vessels to keep
them in compliance, or even to scrap or sell certain vessels altogether. For
example, various jurisdictions that do not already regulate management of
ballast waters are considering regulating the management of ballast waters to
prevent the introduction of non-indigenous species that are considered invasive.
Such regulations could, if implemented, require us to make changes to the
ballast water management plans we currently have in place and to install new
equipment on board. Various jurisdictions are also regulating or considering
the regulation of emissions of sulfur oxides, nitrogen oxides and greenhouse
gases from vessels. Additional conventions, laws and regulations may be adopted
which could limit our ability to do business or increase the cost of our doing
business and which may materially adversely affect our business, financial
condition and results of operations. Because such conventions, laws and
regulations are often revised, or the required additional measures for
compliance are still under development, we cannot predict the ultimate cost of
complying with such conventions, laws and regulations or the impact thereof on
the resale prices or useful lives of our vessels. We are also required by
various governmental and quasi-governmental agencies to obtain certain permits,
licenses, certificates and financial assurances with respect to our operations.

These
requirements can also affect the resale prices or useful lives of our vessels
or require reductions in cargo capacity, ship modifications or operational
changes or restrictions. Failure to comply with these requirements could lead
to decreased availability of or more costly insurance coverage for
environmental matters or result in the denial of access to certain
jurisdictional waters or ports, or detention in certain ports. Under local,
national and foreign laws, as well as international treaties and conventions,
we could incur material liabilities, including cleanup obligations and claims
for natural resource, personal injury and property damages in the event that
there is a release of petroleum or other hazardous materials from our vessels
or otherwise in connection with our operations. Violations of, or liabilities
under, environmental regulations can result in substantial penalties, fines and
other sanctions, including, in certain instances, seizure or detention of our
vessels. Events of this nature would have a material adverse effect on our
business, financial condition and results of operations.

The operation
of our vessels is affected by the requirements set forth in the United Nations
International Maritime Organizations International Management Code for the
Safe Operation of Ships and for Pollution Prevention, or ISM Code. Under the
ISM Code we are required to develop and maintain an extensive Safety Management
System (SMS) that includes the adoption of a safety and environmental
protection policy. Failure to comply with the ISM Code may subject us to
increased liability, invalidate existing insurance or decrease available
insurance coverage for the affected vessels and result in a denial of access
to, or detention in, certain ports. Currently, each of the vessels in our
current fleet is ISM Code-certified. If we fail to maintain ISM Code
certification for our vessels, we may also breach covenants in certain of our
credit 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 also
negatively impact our revenues.

5

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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 spills and other environmental damage. Although our
vessels carry a relatively small amount of the oil used for fuel (bunkers), a
spill of oil from one of our vessels or losses as a result of fire or explosion
could be catastrophic under certain circumstances.

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

In addition,
we do not carry loss of hire insurance. 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; failure to adequately
maintain our vessels could have a material adverse effect on our business,
financial condition and results of operations.

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

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

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

6

---



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

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

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

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

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

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

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

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

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

7

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

We expect to
derive a significant part of our revenues from a limited number of customers.
During the year ended December 31, 2009, approximately 74.9% of our revenues
were derived from two charterers, namely Daiichi and Kawasaki Kisen Kaisha.
Although we tried to diversify our customer base by concluding seven early
redelivery agreements and entering into four period time charters for such affected
vessels, a large percentage of our revenue still depends on a limited number of
customers.

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. We would not receive any revenues from such a
vessel while it remained unchartered, but we may be required to pay expenses
necessary to maintain the vessel in proper operating condition, insure it and
service any indebtedness secured by such vessel. The loss of any of our key
customers, a decline in payments under our charters, or the failure of a key
customer to perform under its charters with us could have a material adverse
effect on our business, financial condition and results of operations.

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

We intend to
grow our business through the acquisition of our contracted newbuilds and we
may make selective acquisitions of other additional vessels. Our future growth
will primarily depend on our ability to locate and acquire suitable additional
vessels, enlarge our customer base, operate and supervise any newbuilds we may
order, and obtain required debt or equity financing on acceptable terms. We
have contracted to acquire six newbuilds scheduled to be delivered through
2012.

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

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

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

8

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

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

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

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

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

As of January
31, 2010, the vessels in our current fleet had an average age of 3.6 years.
Unless we maintain cash reserves for vessel replacement, we may be unable to
replace the vessels in our fleet upon the expiration of their useful lives. We
estimate the useful life of our vessels to be 25 years from the date of initial
delivery from the shipyard. Our cash flows and income are dependent on the
revenues we earn by chartering our vessels to customers. If we are unable to
replace the vessels in our fleet upon the expiration of their useful lives, our
business, financial condition and results of operations will be materially
adversely affected. Any reserves set aside for vessel replacement would not be
available for other cash needs or dividends.

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

The remaining
unpaid balance of the contract prices for our six newbuilds was $274.6 million
as of December 31, 2009. We anticipate that our primary sources of funds to
satisfy these commitments will be cash from operations, additional indebtedness
to be raised and, possibly, equity financing. Our ability to obtain bank
financing or to access the capital markets for future offerings may be limited
by our financial condition at the time of any such financing or offering,
including the actual or perceived credit quality of our charterers and the
market value of our fleet, as well as by adverse market conditions resulting
from, among other things, general economic conditions, weakness in the
financial markets and contingencies and uncertainties that are beyond our
control. Significant contraction, de-leveraging and reduced liquidity in credit
markets worldwide is reducing the availability and increasing the cost of
credit. To the extent that we are unable to enter into new credit facilities
and obtain such additional secured indebtedness on terms acceptable to us, we
will need to find alternative financing. If we are unable to find alternative
financing, we will not be capable of funding all of our commitments for capital
expenditures relating to our contracted newbuilds, we could lose our advances
for vessels under construction, which amounted to $93.5 million as of December
31, 2009, and incur additional liability to charterers and shipyards and our
business, financial condition and results of operations would be adversely
affected.

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 January 31, 2010, the average age of the vessels in
our current fleet was 3.6 years. As our vessels age, they may become less fuel
efficient and more costly to maintain and will not be as advanced as more
recently constructed vessels due to improvements in design and engine
technology. Rates for cargo insurance, paid by charterers, also increase with
the age of a vessel, making older vessels less desirable to charterers.

Governmental
regulations, safety or other equipment standards related to the age of vessels
may require expenditures for alterations, or the addition of new equipment, to
our vessels and may restrict the type of activities in which our vessels may
engage. As our vessels age, market conditions may not justify those
expenditures or enable us to operate our vessels profitably during the
remainder of their useful lives.

9

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Because we generate
substantially all of our revenues in U.S. dollars but incur a material portion
of our expenses in other currencies, and may, in the future, also incur a
material portion of our indebtedness 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 2009 we incurred
approximately 20.24% of our vessel operating expenses in currencies other than
the U.S. dollar. Although as of December 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 use of different currencies could lead to
fluctuations in our net income due to changes in the value of the U.S. dollar
relative to other currencies, in particular the euro and the Japanese yen. We
have not hedged our currency exposure, and, as a result, our results of
operations and financial condition, denominated in U.S. dollars, and our
ability to pay dividends could suffer.

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

Our existing
credit facilities impose, and any future credit facility will impose, operating
and financial restrictions on us. These restrictions in our existing credit
facilities generally limit 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 canceled, 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.                                                                                                                                                                                                                                                                                                                                                     

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;

10

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

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

The
declaration and payment of dividends, if any, will always be subject to the
discretion of our board of directors. The timing and amount of any dividends
declared will depend on, among other things: (i) our earnings, financial condition
and cash requirements and availability, (ii) our ability to obtain debt and
equity financing on acceptable terms as contemplated by our growth strategy,
(iii) provisions of Marshall Islands and Liberian law governing the payment of
dividends, (iv) restrictive covenants in our existing and future debt
instruments, and (v) global financial conditions. We can give no assurance that
dividends will be paid in the future.

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

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

11

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| |   |                                                                        
| | - | -----------------------------------------------------------------------
| |  | the amount
 of cash reserves established by our board of directors; and
| |   |                                                                        
| |  | restrictions
 under Marshall Islands and Liberian law.                 

We may incur
expenses or liabilities or be subject to other circumstances in the future that
reduce or eliminate the amount of cash that we have available for distribution
as dividends, if any. Our growth strategy contemplates that we will finance the
acquisition of our newbuilds or selective acquisitions of 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 decide
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 12-month
period ending March 31, 2010, one of our charters is canceled, 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.

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

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

Pursuant to
our management agreement, our Manager provides us with our executive officers
and 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;

12

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

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
will need to seek approval from our lenders to change our Manager.

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

Pursuant to
our management agreement, we pay our Manager a fee of $575 per day per vessel
for providing commercial, technical and administrative services and a fee of
1.0% 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, which could have a material adverse effect on our business,
financial condition and results of operations.

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

The ability of our Manager to continue providing services for our benefit will depend in part
on its own financial strength. Circumstances beyond our control could impair our Managers financial strength. Because our
Manager is privately held, it is unlikely that information about its financial
strength would become public or available to us prior to any default by our
Manager under the management agreement. As a result, 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. Polys Hajioannou, together with his brother Nicolaos Hadjioannou,
    control Vorini Holdings Inc., which owns approximately 81.99% of our outstanding
    common stock. These relationships could create conflicts of interest between
    us, on the one hand, and our Manager, on the other hand. These conflicts
    may arise in connection with the chartering, purchase, sale and operation
    of the vessels in our fleet versus vessels owned or chartered-in by other
    companies affiliated with our Manager, our chief executive officer or Nicolaos
    Hadjioannou. To the extent we elect not to exercise our right of first refusal
    with respect to any drybulk vessel that may be acquired by companies affiliated with our chief
executive officer or Nicolaos Hadjioannou, such companies
    could acquire and operate such drybulk vessels under the management of our
    Manager in competition with us. Although under our management agreement our
    Manager will be required to first provide us any chartering opportunities
    in the drybulk sector, our Manager is not prohibited from giving preferential
    treatment in other areas of its management to vessels that are beneficially
    owned by related parties. These conflicts of interest may have an adverse
    effect on our results of operations.

13

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

Our future
success depends, to a significant extent, upon our chief executive officer,
Polys Hajioannou, and certain other members of our senior management and of our
Manager. Polys Hajioannou has substantial experience in the drybulk shipping
industry and for 23 years has worked with us and our Manager and its
predecessor. He and others employed by our Manager to manage our business and
our Manager are crucial to the execution of our business strategies and to the
growth and development of our business. If these individuals were no longer to
be affiliated with us or our Manager, or if we were to otherwise cease to
receive advisory services from them, we may be unable to recruit other
employees with equivalent talent and experience, and our business and financial
condition could suffer. We do not intend to maintain key man life insurance
on any of our executive officers.

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

Our chief
executive officer, Polys Hajioannou, has entered into a restrictive covenant
agreement with us under which he is precluded during the term of his service
with us as executive and director and for one year thereafter (and for the term
of our management agreement with our Manager and one year thereafter, if
longer) from owning and operating drybulk vessels and from acquiring, investing
in or controlling any business that owns or operates such vessels. Courts
generally do not favor the enforcement of such restrictions, particularly when
they involve individuals and could be construed as infringing on 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, 2009, vessels
in our fleet have made 19 calls to ports in Iran out of a total of 1,255 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; therefore, you may have more difficulty protecting your interests than
stockholders of a U.S. corporation.

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

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

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

14

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Risks Relating to Our Common Stock

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

Vorini
Holdings Inc., which is controlled by our chief executive officer, Polys
Hajioannou and Nicolaos Hadjioannou, owns approximately 81.99% of
our outstanding common stock. This stockholder is able to control the outcome
of matters on which our stockholders are entitled to vote, including the
election of our entire board of directors and other significant corporate
actions. The interests of this stockholder may be different from yours.

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

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

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

We may issue
additional shares of our common stock in the future and our stockholders may
elect to sell large numbers of shares held by them from time to time.

We filed a
shelf registration statement on Form F-3 with the SEC on October 8, 2009, which
became effective on November 12, 2009. We may use this registration statement
to issue up to an aggregate public offering price of $300.0 million of
additional common or preferred stock, warrants or subscription rights.

Sales of a
substantial number of shares of our common stock in the public market, or the
perception that these sales could occur, may depress the market price for our
common stock. These sales could also impair our ability to raise additional
capital through the sale of our equity securities in the future.

Our existing
stockholders may also experience significant dilution in the future as a result
of any future offering.

We also
entered into a registration rights agreement in connection with our initial
public offering with Vorini Holdings Inc., our principal stockholder, pursuant
to which we have granted it and certain of its transferees the right, under
certain circumstances and subject to certain restrictions, to require us to
register under the Securities Act of 1933, as amended (the Securities Act),
shares of our common stock held by them. Under the registration rights
agreement, Vorini Holdings and certain of its transferees have the right to
request us to register the sale of shares held by them on their behalf and may
require us to make available shelf registration statements permitting sales of
shares into the market from time to time over an extended period. In addition,
those persons have the ability to exercise certain piggyback registration
rights in connection with registered offerings initiated by us. Registration of
such shares under the Securities Act would, except for shares purchased by
affiliates, result in such shares becoming freely tradable without restriction
under the Securities Act immediately upon the effectiveness of such
registration.

15

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

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

These
provisions:

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

We have
adopted a stockholder rights plan pursuant to which our board of directors may
cause the substantial dilution of the holdings of any person that attempts to
acquire us without the approval of our board of directors.

These
anti-takeover provisions, including the provisions of our prospective
stockholder rights plan, could substantially impede the ability of public
stockholders to benefit from a change in control and, as a result, may
adversely affect the market price of our common stock and your ability to
realize any potential change of control premium.

Tax Risks

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

We may earn 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 PFIC are subject to a disadvantageous U.S. federal
income tax regime with respect to the income derived by the PFIC, the distributions
they receive from the PFIC, and the gain, if any, they derive from the sale or
other disposition of their shares in the PFIC. In particular, U.S. holders who
are individuals would not be eligible for the 15% tax rate on qualified
dividends.

16

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

There are
legal uncertainties involved in this determination, 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 Internal Revenue Code of 1986, or the Code, income received under a
time charter of vessels should be treated as rental income rather than services
income. If the reasoning of this case were extended to the PFIC context, the
gross income we derive or are deemed to derive from our time chartering
activities would be treated as rental income, and we would probably be a PFIC.
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E. Tax ConsiderationsUnited States Federal Income Tax
ConsiderationsUnited States Federal Income Taxation of U.S. Holders for a
more comprehensive discussion of the U.S. federal income tax consequences to
U.S. stockholders if we are treated as a PFIC.

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

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

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

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

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

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

17

---



ITEM 4. INFORMATION ON THE
COMPANY

A. History and Development of the Company

Safe Bulkers,
Inc. was incorporated in the Republic of The Marshall Islands on December 11,
2007 under the Marshall Islands Business Corporations Act, for the purpose of
acquiring ownership of various subsidiaries that either owned or were scheduled
to own vessels. We are controlled by the Hajioannou family, which has a long
history of operating and investing in the international shipping industry,
including a long history of vessel ownership. Vassos Hajioannou, the late
father of Polys Hajioannou, our chief executive officer, first invested in
shipping in 1958. Polys Hajioannou has been actively involved in the industry
since 1987, when he joined the predecessor of Safety Management.

Over the past
15 years under the leadership of Polys Hajioannou, we have renewed our fleet by
selling eleven drybulk vessels during periods of what we viewed as favorable
secondhand market conditions and contracting to acquire 30 drybulk newbuilds.
Also under his leadership, we have expanded the classes of drybulk vessels in
our fleet and the aggregate carrying capacity of our fleet has grown from
146,000 deadweight tons, or dwt, in 1995 to 1,077,900 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 company for over 25 years. In June 2008, we completed an initial
public offering of our common stock in the United States and our common stock
began trading on the New York Stock Exchange. We maintain our offices at 30-32
Avenue Karamanli, P.O. Box 70837, 16605 Voula, Athens, Greece. Our telephone
number at that address is 011-30-210-899-4980. Our registered address in the
Marshall Islands is Trust Company Complex, Ajeltake Road, Ajeltake Island,
Majuro, Marshall Islands MH96960. The name of our registered agent at such
address is The Trust Company of the Marshall Islands, Inc.

B. Business Overview

We are an
international provider of marine drybulk transportation services, transporting
bulk cargoes, particularly coal, grain and iron ore, along worldwide shipping
routes for some of the worlds largest consumers of marine drybulk
transportation services. As of January 31, 2010, we had a fleet of 13 drybulk
vessels, with an aggregate carrying capacity of 1,077,900 dwt and an average
age of 3.6 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
2012 as the result of the delivery of six further contracted newbuilds,
comprised of four Post-Panamax and two Capesize class vessels. Upon delivery of
the last of our contracted newbuilds, our fleet will be comprised of 19
vessels, having an aggregate carrying capacity of 1,807,900 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 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 January
31, 2010 our fleet comprised 13 vessels, of which four are Panamax, three are
Kamsarmax and six are Post-Panamax class vessels, with an aggregate carrying
capacity of 1,077,900 dwt and an average age of 3.6 years. Assuming delivery of
the last of our contracted newbuilds in 2012, our fleet will be comprised of
four Panamax, three Kamsarmax, ten Post-Panamax and two Capesize class vessels,
and the aggregate carrying capacity of our 19 vessels will be 1,807,900 dwt. As
of January 31, 2010, the average remaining duration of the charters for our
existing fleet was 3.0 years.

The majority
of vessels in our fleet have sister ships with similar specifications in our
existing or newbuild fleet. We believe using sister ships provides cost savings
because it facilitates efficient inventory management and allows for the
substitution of sister ships to fulfill our period time charter obligations.

18

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Our Fleet and Newbuilds

The table
below presents additional information with respect to our drybulk vessel fleet,
including our newbuilds, and its deployment as of January 31, 2010.

|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|------------------ |  | --------- |  | ------------------ |  | ------------------------ |  | ------------- |  | ----------------- |  | ---------------- |  | ---------------------- |  | --------------- | 
|Vessel Name        |  | Dwt       |  | Year 
 Built 
 (1) |  | Country of
 Construction |  | Charter
 Type |  | Charter
 Rate (2) |  | Commissions
 (3) |  | Charter Period (4)     |  | Sister Ship (5) | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Current Fleet      |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Panamax            |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Maria              |  | 76,000    |  | 2003               |  | Japan                    |  | Time          |  | $18,000           |  | 3.75%            |  | Jun. 2009  Aug. 2010  |  | A               | 
|                   |  |           |  |                    |  |                          |  | Time          |  | $17,750           |  | 0.00%            |  | Sep. 2010  Apr. 2011  |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Vassos             |  | 76,000    |  | 2004               |  | Japan                    |  | Time          |  | $29,000           |  | 1.25%            |  | Nov. 2008  Oct. 2013  |  | A               | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Katerina           |  | 76,000    |  | 2004               |  | Japan                    |  | Time          |  | $15,500           |  | 4.75%            |  | Jun. 2009  May 2011   |  | A               | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Maritsa            |  | 76,000    |  | 2005               |  | Japan                    |  | Time          |  | $15,500           |  | 4.75%            |  | Jan. 2009  Feb. 2010  |  | A               | 
|                   |  |           |  |                    |  |                          |  | Time (7)      |  | $32,000           |  | 1.25%            |  | Mar. 2010  Mar. 2012  |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  | $28,000           |  |                  |  | Mar. 2012  Mar. 2013  |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  | $24,000           |  |                  |  | Mar. 2013  Mar. 2015  |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Kamsarmax          |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Pedhoulas Merchant |  | 82,300    |  | 2006               |  | Japan                    |  | Time (6)      |  | $43,120           |  | 1.25%            |  | Jan. 2009  Mar. 2010  |  | B               | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Pedhoulas Trader   |  | 82,300    |  | 2006               |  | Japan                    |  | Time
 (7)     |  | $69,000           |  | 1.00%            |  | Aug. 2008  Jul.
 2009 |  | B               | 
|                   |  |           |  |                    |  |                          |  |               |  | $56,500           |  |                  |  | Aug. 2009
  Jul. 2010 |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  | $42,000           |  |                  |  | Aug. 2010
  Jul. 2011 |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  | $20,000           |  |                  |  | Aug. 2011  Jul. 2013  |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Pedhoulas Leader   |  | 82,300    |  | 2007               |  | Japan                    |  | Time          |  | $18,500           |  | 4.75%            |  | Jul. 2009  Jun. 2011  |  | B               | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Post-Panamax       |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Stalo              |  | 87,000    |  | 2006               |  | Japan                    |  | Spot          |  | $32,000           |  | 3.75%            |  | Jan. 2010  Mar. 2010  |  | C               | 
|                   |  |           |  |                    |  |                          |  | Time          |  | $34,160           |  | 1.25%            |  | Mar. 2010  Feb. 2015  |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Marina             |  | 87,000    |  | 2006               |  | Japan                    |  | Time
 (7)     |  | $61,500           |  | 2.50%            |  | Dec. 2008  Mar.
 2009 |  | C               | 
|                   |  |           |  |                    |  |                          |  |               |  | $57,500           |  |                  |  | Apr.
 2009  Dec. 2009 |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  | $52,500           |  |                  |  | Dec. 2009 
 Dec. 2010 |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  | $42,500           |  |                  |  | Dec. 2010  Dec. 2011  |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  | $32,500           |  |                  |  | Dec. 2011  Oct. 2012  |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  | $31,500           |  |                  |  | Oct. 2012  Dec. 2012  |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  | $21,500           |  |                  |  | Dec. 2012  Dec. 2013  |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Sophia             |  | 87,000    |  | 2007               |  | Japan                    |  | Time          |  | $34,720           |  | 1.25%            |  | Oct. 2008  Sep. 2013  |  | C               | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Eleni              |  | 87,000    |  | 2008               |  | Japan                    |  | Time          |  | $66,400           |  | 1.25%            |  | Oct. 2009  Mar. 2010  |  | C               | 
|                   |  |           |  |                    |  |                          |  | Time          |  | $34,160           |  | 1.25%            |  | Apr. 2010  Mar. 2015  |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Martine            |  | 87,000    |  | 2009               |  | Japan                    |  | Time          |  | $40,500           |  | 1.25%            |  | Feb. 2009  Feb. 2014  |  | C               | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Andreas K          |  | 92,000    |  | 2009               |  | South
 Korea             |  | Time          |  | $20,500           |  | 3.75%            |  | Nov. 2009 
 Nov. 2010 |  | D               | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Subtotal           |  | 1,077,900 |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|New builds         |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Post-Panamax       |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Hull No. 1050      |  | 92,000    |  | 1H
 2010           |  | South
 Korea             |  | Time          |  | $22,750           |  | 3.75%            |  | Apr. 2010  Apr. 2011  |  | D               | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Hull No. 1583      |  | 95,000    |  | 2H
 2010           |  | Japan                    |  |               |  |                   |  |                  |  |                        |  | E               | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Hull No. 1579      |  | 95,000    |  | 2H
 2011           |  | Japan                    |  |               |  |                   |  |                  |  |                        |  | E               | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Hull No. 1594      |  | 95,000    |  | 1H
 2012           |  | Japan                    |  |               |  |                   |  |                  |  |                        |  | E               | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Capesize           |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Hull No. 1144      |  | 177,000   |  | 1H
 2010           |  | China                    |  | Time          |  | $25,928           |  | 2.50%            |  | Aug. 2011  Apr. 2031  |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Hull No. 1074      |  | 176,000   |  | 2H
 2011           |  | China                    |  | Time          |  | $38,000           |  | 1.00%            |  | Jun. 2012 
 May 2022  |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|Subtotal           |  | 730,000   |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|TOTAL              |  | 1,807,900 |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 
|                   |  |           |  |                    |  |                          |  |               |  |                   |  |                  |  |                        |  |                 | 

|    |                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For newbuilds, the dates shown reflect the expected
 delivery dates.                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                     
|(2) | Quoted charter rates are gross charter rates. Gross
 charter rates are inclusive of commissions. Net charter rates are charter
 rates after the payment of commissions.                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                     
|(3) | Commissions reflect payments made to third-party
 brokers or our charterers, and do not include the 1.0% 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
 January 31, 2010, scheduled start dates. Actual start dates and
 redelivery dates may differ from the scheduled start and redelivery dates depending
 on the terms of the charter and market conditions.                             
|    |                                                                                                                                                                                                                                                                                                                                                                     
|(5) | Each vessel with the same letter is a sister ship
 of each other vessel that has the same letter, and under certain of our
 charter contracts, may be substituted with its sister ships.                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                     
|(6) | In December 2009, we agreed with the charterer of the
vessel Pedhoulas Merchant to terminate the existing charter during February
or March 2010. In exchange for the early redelivery of this vessel, the charterer
agreed to pay cash compensation ranging from $5.1 million to $5.8 million, net
of commissions, depending on the vessels actual redelivery
date.
|    |                                                                                                                                                                                                                                                                                                                                                                     
|(7) | Charter agreement which provides for variable charter
 rates.                                                                                                                                                                                                                                                                                                       

19

---



From the
beginning of 1995 through January 31, 2009, we have taken delivery of
24 newbuilds. We are currently contracted to take delivery of a further
six newbuilds, comprised of one South Korean-built Post-Panamax class
vessel, with an amended contract price of $72.0 million, scheduled for
delivery in 2010, three Japanese-built Post-Panamax class vessels, the first
with a contract price of $49.0 million, the second with an amended contract
price of $56.0 million and the third with a contract price of $48.0 million,
scheduled for delivery in 2010, 2011 and 2012, respectively, and two
Chinese-built Capesize class vessels, with a contract price of $63.0 million
and an amended contract price of $80.0 million, respectively, scheduled for
delivery in 2010 and 2011, respectively. In addition to payment of the contract
prices for the newbuilds, we are required to make payments to our
counterparties under such contracts for certain adjustments or modifications,
to third party brokers as commissions and to our Manager under our Management
Agreement.

Chartering of Our
Fleet

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

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

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

Our Customers

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

20

---



Management of Our Fleet

We have a
management agreement pursuant to which our Manager provides us with technical,
administrative, commercial and certain other services for an initial term
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. We have not provided such notice to our Manager and
our management agreement will be automatically renewed after the initial
expiration on June 3, 2010. Our arrangements with our Manager and its
performance are reviewed by our board of directors. Our chief executive
officer, president, chief financial officer and chief operating officer,
collectively referred to in this annual report as our executive officers,
provide strategic management for our company and also supervise the management
of our day-to-day operations by our Manager. Our Manager reports to us and our
board of directors through our executive officers.

In return for
providing such services our Manager 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.

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

Historically
our Manager has rarely provided services to third parties. Currently our
Manager provides certain management services to two vessels operated by an
unaffiliated third party pursuant to a waiver of the relevant provisions of the
Management Agreement, approved by our independent directors, and one vessel
operated by an affiliated third party.

Competition

We operate in
highly competitive markets that are based primarily on supply and demand. Our
business fluctuates in line with the main patterns of trade of the major
drybulk cargoes and varies according to changes in the supply and demand for
these items. We believe we differentiate ourselves from our competition by
providing young, modern vessels with advanced designs and technological
specifications. As of January 31, 2010 our fleet had an average age of 3.6
years compared to an industry average of approximately 15 years. Upon delivery
of our contracted newbuilds, a majority of our expected fleet will have been
built in Japanese shipyards, which we believe provides us with an advantage in
attracting large, well-established customers, including Japanese customers.

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

Crewing and Shore
Employees

Our management
team consists of our chief executive officer, president, chief financial
officer and chief operating officer, all of whom are provided by our Manager.
In addition, we employ a legal representative for our office in Greece. Our
Manager is responsible for the technical management of our fleet and therefore
also handles the recruiting, either directly or through a crewing agent, of the
senior officers and all other crew members for our vessels. As of December 31,
2009, 294 people served on board the vessels in our fleet, and our Manager
employed 38 people, all of whom were shore-based.

Permits and
Authorizations

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

21

---



Risk of Loss and
Liability Insurance

General

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

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

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

Hull and machinery insurance

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

Protection and indemnity insurance

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

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

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

Although the
P&I Associations compete with each other for business, they have found it
beneficial to mutualise their larger risks among themselves through the
International Group. This is known as The Pool. This pooling is regulated by
a contractual agreement which defines the risks that are to be covered and how
claims falling on The Pool are to be shared among the participants in the
International Group. The Pool provides a mechanism for sharing all claims in
excess of $7.0 million up to $50.0 million. For claims in excess of $50.0
million, the International Group purchases reinsurance from the commercial
market to cover pollution expenses up to $1.0 billion per vessel per incident
and up to $2.0 billion in respect of passengers and up to $3.0 billion in
respect of passengers and seamen, per vessel per incident.

War risks insurance

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

22

---



Inspection by
Classification Societies

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

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

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

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

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

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

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

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

|                   |  |                |  |                   
|------------------ |  | -------------- |  | ------------------
|Vessel Name        |  | Drydocking (1) |  | Special Survey (1)
|                   |  |                |  |                   
|Maria              |  | April 2012     |  | April 2013        
|Vassos             |  | March 2011     |  | February 2014     
|Katerina           |  | October 2011   |  | May 2014          
|Maritsa            |  | June 2012      |  | January 2015      
|Pedhoulas Merchant |  | March 2010     |  | March 2011        
|Pedhoulas Trader   |  | May 2010       |  | May 2011          
|Pedhoulas Leader   |  | February 2011  |  | February 2012     
|Stalo              |  | December 2012  |  | January 2011      
|Marina             |  | March 2010     |  | January 2011      
|Sophia             |  | June 2011      |  | June 2012         
|Eleni              |  | November 2012  |  | November 2013     
|Martine            |  | February 2013  |  | February 2014     
|Andreas K          |  | August 2013    |  | August 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.

23

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Environmental and Other Regulations

General

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

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

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

The International Maritime Organization

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

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

24

---



In addition,
the European Union has established separate limitations on sulfur content of
marine fuels, and some European Union countries may be declared Emission
Control Areas in the future, pursuant to Annex VI and its amendments. On March
27, 2009, the United States requested the International Maritime Organization
to designate the area extending 200 miles from the territorial sea baseline
adjacent to the Atlantic/Gulf and Pacific coasts and the eight main Hawaiian
Islands as Emission Control Areas under Annex VI and its amendments. If the IMO
approves these or other Emission Control Areas, or other new or more stringent
emissions requirements are adopted by the European Union, the U.S. or
individual states, or other jurisdictions in which we operate, compliance with
these requirements could entail significant capital expenditures or otherwise
increase the costs of our operations.

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

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

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

The U.S. Oil Pollution Act of 1990

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

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

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

25

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

Effective July
31, 2009, the U.S. Coast Guard adopted regulations that adjust the limits of
liability of responsible parties under OPA 90 to the greater of $1,000 per
gross ton or $854,400 per non-tank vessel and established a procedure for
adjusting the limits for inflation every three years. These limits of liability
do not apply if an incident was directly caused by violation of applicable U.S.
safety, construction or operating regulations or by a responsible partys gross
negligence or willful misconduct, or if the responsible party fails or refuses
to report the incident or to cooperate and assist in connection with oil
removal activities.

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

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

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

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

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

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

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

26

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The U.S. Clean Water Act

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

The U.S. Clean Air Act

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

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

Other environmental initiatives

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

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

27

---



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 December 31, 2009, the BWM
Convention had been adopted by 21 states, representing 22.63% of the worlds
tonnage. Each vessel in our current fleet has been issued a BWM plan Statement
of Compliance by the classification society with respect to the applicable IMO
regulations and guidelines.

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

Greenhouse Gas Regulation

In February
2005, the Kyoto Protocol to the United Nations Framework Convention on Climate
Change entered into force. Pursuant to the Protocol, adopting countries are
required to implement national programs to reduce emissions of certain gases,
generally referred to as greenhouse gases, which are suspected of contributing
to global warming. Currently, the emissions of greenhouse gases from
international shipping are not subject to the Kyoto Protocol. However, a new
treaty may be adopted in the future that includes restrictions on shipping emissions.
International and multinational bodies or individual countries also may adopt
their own climate change regulatory initiatives. The IMO recently announced its
intention to develop reduction measures for greenhouse gases from international
shipping in 2010. The European Union has indicated that it intends to propose
an expansion of the existing European Union emissions trading scheme to include
emissions of greenhouse gases from vessels. In the United States, the EPA is
considering a petition from the California Attorney General and a coalition of
environmental groups to regulate greenhouse gas emissions from ocean-going
vessels under the Clean Air Act. Climate change initiatives also are being
considered in the U.S. Congress. These or other developments may result in U.S.
federal regulations relating to the control of greenhouse gas emissions. Any
passage of climate control legislation or other regulatory initiatives by the
IMO, European Union, the U.S. or other individual countries where we operate that
restrict emissions of greenhouse gases could entail financial impacts on our
operations that we cannot predict with certainty at this time.

Vessel security regulations

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

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

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

Seasonality

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

28

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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, 19 either own vessels in our fleet or
are parties to contracts to obtain newbuild vessels. Our subsidiaries are
wholly-owned by us. A list of our subsidiaries as of January 31, 2010 is set forth
in Exhibit 8.1 to this annual report.

D. Property, Plant and Equipment

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

29

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ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

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

Overview

Our business
is to provide international marine drybulk transportation services by operating
vessels in the drybulk sector of the shipping industry. As of January 31,
2010 our fleet consisted of 13 drybulk vessels, and we had newbuild contracts
for an additional six vessels with an aggregate capacity of 730,000 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
January 31, 2010, our fleet was comprised of 12 vessels employed on period
time charters and one vessel employed on a spot charter. We believe our
customers, some of which have been chartering our vessels or vessels of our
predecessor 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, 2007, 2008
and 2009 was 10.7, 11.1 and 13.2, respectively.

After delivery
of our contracted newbuilds, our drybulk fleet will consist of 19 vessels and
will have an aggregate carrying capacity of 1,807,900 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 provides us 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 Inc., which is a
corporation wholly-owned by Polys Hajioannou.

A. Operating Results

Our operating
results are largely driven by the following factors:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Ownership days. We define ownership days as
 the aggregate number of days in a period during which each vessel in our
 fleet has been owned by us. Ownership days are an indicator of the size of
 our fleet over a period and affect both the amount of revenues and the amount
 of expenses that we record during a period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Available days. We define available days
 (also referred to as voyage days) as the total number of days in a period
 during which each vessel in our fleet was in our possession net of off-hire
 days associated with scheduled maintenance, which includes major repairs,
 drydockings, vessel upgrades or special or intermediate surveys. Available
 days are used to measure the number of days in a period during which vessels
 should be capable of generating revenues.                                                                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Operating days. We define operating days as
 the number of our available days in a period less the aggregate number of
 days that our vessels are off-hire due to any reason, excluding scheduled
 maintenance. Operating days are used to measure the aggregate number of days
 in a period during which vessels actually generate revenues.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Fleet utilization. We calculate fleet
 utilization by dividing the number of our operating days during a period by
 the number of our ownership days during that period. Fleet utilization is
 used to measure a companys ability to efficiently find suitable employment
 for its vessels and minimize the number of days that its vessels are off-hire
 for reasons such as scheduled repairs, vessel upgrades, drydockings or
 special surveys. During the three years ended December 31, 2009, our
 average annual fleet utilization rate was approximately 99.30%. However, an
 increase in annual off-hire days could reduce our operating days, and
 therefore, our fleet utilization.                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Time charter equivalent rates. We define
 time charter equivalent rates, or TCE rates, as our charter revenues less
 commissions and voyage expenses during a period divided by the number of our
 available days during the period. TCE rate is a standard shipping industry
 performance measure used primarily to compare daily earnings generated
by vessels on period time charters and trip time charters with daily earnings
 generated by vessels on voyage charters, because charter rates for vessels on voyage charters are
 generally not expressed in per day amounts, while charter rates for vessels
 on period time charters and trip time charters generally are expressed in
 such amounts. We have only rarely employed our vessels on voyage charter and,
 as a result, generally our TCE rates equal our time charter rates.

30

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|                                 |  |                                                                                           |         |      |   |         |  |   |         | 
|-------------------------------- |  | ----------------------------------------------------------------------------------------- | ------- | ---- | - | ------- |  | - | ------- | 
|                                 |  | Year Ended
 December 31,                                                                  |        
|                                 |  |                                                                                           |        
|                                 |  | 2007                                                                                      |         | 2008 |   | 2009    | 
|                                 |  |                                                                                           |         |      |   |         | 
|                                 |  | (In
 thousands of U.S. dollars
 except available days and time charter equivalent 
 rate) |        
|Time charter revenues            |  | $                                                                                         | 172,057 |      | $ | 208,411 |  | $ | 168,400 | 
|Less commissions                 |  |                                                                                           | 6,209   |      |   | 7,639   |  |   | 3,794   | 
|Less voyage expenses             |  |                                                                                           | 179     |      |   | 273     |  |   | 577     | 
|                                 |  |                                                                                           |         |      |   |         |  |   |         | 
|Time charter equivalent
 revenue |  | $                                                                                         | 165,669 |      | $ | 200,499 |  | $ | 164,029 | 
|                                 |  |                                                                                           |         |      |   |         |  |   |         | 
|Available days                   |  |                                                                                           | 3,914   |      |   | 4,040   |  |   | 4,795   | 
|                                 |  |                                                                                           |         |      |   |         |  |   |         | 
|Time
 charter equivalent rate    |  | $                                                                                         | 42,327  |      | $ | 49,626  |  | $ | 34,208  | 
|                                 |  |                                                                                           |         |      |   |         |  |   |         | 

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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, |       
|                                 |  |                         |       
|                                 |  | 2007                    |        | 2008 |   | 2009   |  
|                                 |  |                         |        |      |   |        |  
|Ownership
 days                  |  |                         | 3,914  |      |   | 4,075  |   |   | 4,817  |  
|Available
 days                  |  |                         | 3,914  |      |   | 4,040  |   |   | 4,795  |  
|Operating
 days                  |  |                         | 3,913  |      |   | 4,025  |   |   | 4,778  |  
|Fleet
 utilization               |  |                         | 99.98  | %    |   | 98.77  | % |   | 99.19  | %
|TCE rates                        |  | $                       | 42,327 |      | $ | 49,626 |   | $ | 34,208 |  
|Daily vessel
 operating expenses |  | $                       | 3,176  |      | $ | 4,323  |   | $ | 4,075  |  

Revenues

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

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

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

31

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Revenues from
our period time charters comprised 48.9%, 83.6% and 92.8%, respectively, of our
charter revenues for the years ended December 31, 2007, 2008 and 2009. The
revenues from our spot charters comprised 51.1%, 16.4% and 7.2%, respectively,
of our charter revenues for the years ended December 31, 2007, 2008 and
2009.

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/Accrued Revenue

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

Accrued
revenue as of December 31, 2009 represents revenue earned prior to cash being
received from varying charter rates in the amount of $1.7 million.

Unearned
revenue as of December 31, 2008 includes: (i) revenue received prior to the
balance sheet date relating to services that were rendered after the balance
sheet date amounting to $6.4 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
would be recognized as revenue during the period ending December 31, 2009 and
$11.8 million of which would be recognized as revenue during the period from
January 1, 2011 until March 31, 2015.

Accrued
revenue as of December 31, 2008 represents revenue earned prior to cash being
received from varying charter rates in the amount of $3.9 million.

We did not
record any unearned revenue or accrued 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 21 to our financial statements.

Commissions

We pay
commissions ranging up to 5.5% 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 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. 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.

32

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Depreciation

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

Vessels, Net

Vessels are
recorded at their historical cost, which consists of the contracted purchase
price, any direct material expenses incurred upon acquisition (including
improvements, on-site supervision expenses incurred during the construction period,
commissions paid, delivery expenses and other expenditures to prepare the
vessel for her initial voyage) and financing costs incurred during the
construction of the vessel. 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. For the year ended December 31, 2009, we capitalized interest
amounting to $58,826.

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

In relation to
expenses paid to third parties associated with our 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.

33

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Inflation

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

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
year ended December 31, 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     
|                            |  |           |  |                                |  |                   
|Pedhoulas Farmer            |  | Kamsarmax |  | Maxpente
 Shipping Corporation |  | January 9,
 2007  
|                            |  |           |  |                                |  |                   
|Pedhoulas Fighter           |  | Kamsarmax |  | Maxtria
 Shipping Corporation  |  | January 26,
 2007 
|                            |  |           |  |                                |  |                   
|Kanaris                     |  | Panamax   |  | Kanastro
 Shipping Corporation |  | February 20,
 2007
|                            |  |           |  |                                |  |                   
|Eleni (the Old Eleni) (1) |  | Panamax   |  | Eleoussa
 Shipping Corporation |  | March 26,
 2007   

|    |                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | This sold
 vessel has the same name as another vessel in our current fleet, so we refer
 to this sold vessel as the Old Eleni.

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

|  |                         |  |      |   |      |   |   | 
|- | ----------------------- |  | ---- | - | ---- | - | - | 
|  | Year Ended December 31, | 
|  |                         | 
|  | 2007                    |  | 2008 |   | 2009 |  
|  |                         |  |      |   |      |  
|$ | 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. In June 2009 we agreed to sell our oldest vessel, Efrossini,
which was delivered to her new owners on January 7, 2010. As a result, we
expect that gains from vessel sales and commissions payable to our Manager will
increase in 2010.

Early Redelivery
Cost/Income

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

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

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

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 terminated 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
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
July 2009, at a daily charter rate of $48,500.

34

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On
September 20, 2007, we entered into an agreement, at our request, with the
then-current charterer of the Katerina
to 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 was subsequently fixed on another spot charter until June
29, 2008 at a daily rate of $94,000.

On March 7,
2008, we agreed with the charterers of the Pedhoulas
Trader to terminate the $54,000 daily fixed rate time charter which
had commenced on February 9, 2008, and was due to expire by July 24, 2008. As
compensation for early redelivery of the vessel, Petra Shipping Ltd. (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.

On
January 1, 2009, we took
early redelivery of the Maritsa, instead of on January 13, 2009. The
respective charterer paid cash compensation of $0.6 million, net of commissions.

On
March 15, 2009, we took
early redelivery of the Efrossini,
instead of on January 8, 2011. The respective charterer paid cash compensation
of $25.5 million, net of
commissions. An amount of $3.6 million, representing the unearned revenue from the terminated period time
charter contract, was recorded as additional early redelivery income.

On June 26, 2009, we took early redelivery of
the Katerina, instead of on
November 26, 2010. The respective charterer paid cash compensation of $21.5
million, net of commissions. An amount
of $0.9 million, representing
the unearned revenue from the terminated period time charter contract, was
recorded as additional early redelivery income.

On June 28, 2009, we took early redelivery of
the Maria, instead of on January 2, 2011. The respective charterer paid
cash compensation of $15.5 million,
net of commissions. An amount of $4.5 million, representing the unearned revenue from the terminated period time
charter contract, was recorded as additional early redelivery income.

On July 19,
2009, we took early redelivery of the Pedhoulas Leader, instead of on November
22, 2009. The respective charterer paid cash compensation of $2.7 million, net
of commissions.

On July 20,
2009, we took early redelivery of the Stalo, instead of on July 29, 2009. The
respective charterer paid cash compensation of $0.2 million, net of
commissions.

On December 17, 2009, we
agreed with the charterer of the Pedhoulas Merchant to terminate the
existing charter in February or March of 2010, instead of November 5, 2010. In
exchange for the early redelivery of this vessel, the charterer agreed to pay
cash compensation ranging from $5.1 million to $5.8 million, net of
commissions, depending on the vessels actual redelivery date. The early
redelivery income arising out of this arrangement will be recorded on redelivery
of the vessel in 2010.

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.

35

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Vessels Depreciation

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

Impairment of Long-lived Assets

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

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

Refer to Note 2 of the financial statements attached to this annual report.

Results of Operations

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

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

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

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

Revenues

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

Commissions

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

Vessel operating expenses

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

36

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

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

Depreciation

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

General and administrative expenses

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

Interest expense

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

Loss on derivatives

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

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

Foreign currency (loss)/gain

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

Early redelivery (cost)/income

During the year ended
December 31, 2009, we recorded
early redelivery income, relating to the early termination of period time
charters of our vessels, of $75.0 million compared to $0.6 million early
redelivery cost during the year ended December 31, 2008. Early redelivery income during the
year ended December 31, 2009 is
analyzed as follows: (i) Maritsawas redelivered on January 1, 2009 instead of January 13, 2009, for which we
received compensation of $0.6 million, net of commissions, (ii) Efrossini was redelivered on March 15,
2009 instead of January 8, 2011, for which we recognized income of $29.1
million consisting of cash compensation received of $25.5 million, net of
commissions, and $3.6 million representing the unearned revenue from the
terminated period time charter contract, (iii) Katerinawas redelivered on June 26, 2009 instead of November 26, 2010, for which we
recognized income of $22.3 million consisting of cash compensation paid by the
relevant charterer on July 1, 2009 of $21.5 million, net of commissions, and
$0.9 million representing the unearned revenue from the terminated period time
charter contract, (iv) Maria was redelivered on June 28, 2009 instead of
January 2, 2011, for which we recognized income of $20.0 million consisting of
cash compensation paid by the relevant charterer on July 1, 2009 of $15.5
million, net of commissions, and $4.5 million representing the unearned revenue
from the terminated period time charter contract, (v) Pedhoulas Leader was redelivered on July
19, 2009 instead of November 22, 2009, for which
we received cash compensation of $2.7 million, net of commissions and
(vi) Stalo was redelivered on July 20, 2009 instead of July 29, 2009, for
which we received cash compensation of $0.2 million, net of commissions. Early
redelivery cost during the year ended December 31, 2008 is due to cash compensation of $0.8
million paid to the charterer for the early redelivery of Pedhoulas
Trader, which was reduced by $0.2 million of early redelivery income
representing the unearned revenue of Marinafrom the terminated period time charter contract.

37

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Loss on asset purchase cancellations

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

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, 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 and 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.

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.

38

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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 as a result of the realized loss and 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.

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 in 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 were denominated in foreign currency
    as of December 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
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.

B. Liquidity and Capital Resources

As of December 31, 2009, we
had $87.5 million in cash and restricted cash, of which 18.4 million consisted of cash and
cash equivalents, $57.9 million
consisted of short-term bank deposits with original maturities longer than
three months and shorter than 12 months, $6.4
million consisted of short-term restricted cash and $4.8 million consisted of long-term
restricted cash. In addition, as of December 31, 2009, we had $50.0 million in
a long-term floating rate note investment (for more information, please see
Note 10 to our financial statements included at the end of this annual report).
Against this investment we may borrow, under certain conditions, up to $40.0
million in cash.

39

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As of December 31, 2009, we
had aggregate debt outstanding of $471.2 million, of which $50.2 million was
payable within the next 12 months, including the entire outstanding balance of
$34.5 million for the loan secured by the Efrossini,
which was fully repaid on January 7, 2010 in connection with the vessels
delivery to her new owners. As of December 31, 2009, we had additional
borrowing capacity of $1.9 million under one of our credit facilities, and we
accepted two commitment letters for new bank credit facilities for Hull No. 1144 and Andreas K in the aggregate amount of $74.5
million. The agreement for the secured credit facility relating to Andreas K was
concluded in 2010 and $34.5 million was drawn on February 1, 2010.

Our primary liquidity needs
are to fund capital expenditures in relation to newbuild contracts, financing
expenses, debt repayment, vessel operating expenses, general and administrative
expenses and dividend payments to our stockholders. We anticipate that our
primary sources of funds will be cash from operations, additional indebtedness
to be raised and, possibly, equity financing. Our commitments for newbuilds of
$274.6 million as of December 31, 2009 consisted of $176.1 million which is
payable in 2010, $74.5 million of which is payable in 2011 and $24.0 million of which
is payable in 2012. These commitments represent the remaining installment payments
for the delivery of six newbuild vessels scheduled to be delivered as follows:
three vessels in 2010, two vessels in 2011 and one vessel in 2012.

We currently estimate that
the contracted cash flow from operations will be sufficient to fund the operations
of our fleet, including our working capital requirements, and the capital
expenditure requirements through the end of 2010. However, during 2010 or 2011,
we may seek additional indebtedness to partially fund our capital expenditure
requirements in order to maintain a stronger cash position. We may incur
additional indebtedness secured by our other five newbuild vessels which are
currently unencumbered. To the extent that market conditions deteriorate,
charterers may default or seek to renegotiate charter contracts, and vessel
valuations may decrease, resulting in a breach of our debt covenants. In such
case our contracted revenues may decrease and we may be required to make
additional prepayments under existing loan facilities, resulting in additional financing
needs. If we acquire
additional vessels, our capital expenditure requirements will increase and we
will need to rely on our present cash position, our surpluses from operations,
additional borrowings under new credit facilities and proceeds from equity
financing. If we are unable to
obtain additional indebtedness, or to find alternative financing, we will not
be capable of funding our commitments for capital expenditures relating to our
contracted newbuilds, which could adversely impact the dividends we intend to
pay, and could have a material adverse effect on our business, financial
condition, results of operations and scheduled fleet expansion.

We have paid dividends to
our stockholders, each quarter since our initial public offering in June 2008,
    including an aggregate amount of $32.7 million over four consecutive quarterly
    dividends, each in the amount of $0.15 per share, paid during 2009. We also
    declared a dividend of $0.15 per share, payable on February 26, 2010,
    to our shareholders of record on February 19, 2010. Our future liquidity
    needs will impact our dividend policy. We currently intend to use a portion
    of our free cash to pay dividends to our stockholders. The declaration and
    payment of dividends, if any, will always be subject to the discretion of
    our board of directors. The timing and amount of any dividends declared will
    depend on, among other things: (i) our earnings, financial condition and
    cash requirements and availability, (ii) our ability to obtain debt and equity
    financing on acceptable terms as contemplated by our growth strategy, (iii) provisions
    of Marshall Islands and Liberian law governing the payment of dividends,
    (iv) restrictive covenants in our existing and future debt instruments and
    (v) global financial conditions. We can give no assurance that dividends
    will be paid in the future.

Cash Flows

Cash and cash
equivalents decreased to $18.4 million as of December 31, 2009, compared 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.

Net Cash (Used in)/Provided by Operating
Activities

Net cash
provided by operating activities amounted to $211.3 million in 2009, consisting
of net income after non-cash items of $195.1 million plus an increase in
working capital of $16.2 million. Net cash provided by operating activities
amounted to $259.6 million in 2008, consisting of net income after non-cash
items of $156.7 million plus an increase in working capital of $102.9 million.
The increase in working capital was mainly attributable to the settlement of
amounts due from the Manager of $96.4 million prior to our initial public offering.

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.

Net Cash (Used in)/Provided by Investing
Activities

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

40

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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 (Used in)/Provided by Financing
Activities

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

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.

Credit Facilities

We operate in
a capital intensive industry which requires significant amounts of investment,
and we fund a portion of this investment through long-term bank debt. Our
subsidiaries have entered into individual credit facilities in order to finance
the acquisition of the vessels owned by these subsidiaries and for general
corporate purposes. The durations until maturity of our various credit facilities
outstanding in December 31, 2009, range from 10 to 15 years, and they are repaid
    by semiannual principal installments and a balloon payment due on maturity.
    We pay interest on these facilities which is based on floating rate LIBOR
    plus an applicable margin. The obligations under our credit facilities are
    secured by first priority mortgages over the vessels owned by the respective
    borrower subsidiaries, first priority assignments of all insurances and earnings
    of the mortgaged vessels and guarantees by Safe Bulkers, Inc.

During 2009,
we drew down loans totaling $42.0 million and we repaid $38.0 million of our
indebtedness. As of December 31, 2009, we had 13 outstanding credit facilities
with a combined outstanding balance of $471.2 million. These credit facilities
have maturity dates between 2017 and 2023. For a description of our credit
facilities as of December 31, 2009, please see Note 9 to our financial
statements included at the end of this annual report. During 2010, we plan to
repay approximately $50.2 million of our long-term debt outstanding as of
December 31, 2009. On January 7, 2010, we repaid the entire amount
outstanding on the Efrossinicredit facility concurrently with the sale of the vessel. On February 1, 2010,
we drew down a loan of $34.5 million, secured by the vessel Andreas K and other
security, to increase our cash reserves. For more information regarding this
credit facility, please refer to Note 25(a) of the financial statements
included at the end of this annual report.

Covenants under Credit Facilities

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

| |   |                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | pay
 dividends if an event of default has occurred and is continuing or would
 occur as a result of the payment of such dividends;                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                
| |  | permit us to
 pay dividends if, during the 12-month period ending March 31, 2010, one of
 our charters is canceled, 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;                                                                                                                                                                                                                                                                                                                                                                                    

41

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

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; and                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                       
| |  | a minimum of
 51% of its shares shall remain directly or indirectly beneficially owned by
 the Hajioannou family for the duration of the relevant credit facilities.                                                                                                                                                  

We entered
into supplemental agreements with our respective lenders on April 6, 2009, in
relation to the loan facilities of Marathassa Shipping Corporation
(Marathassa), Marinouki Shipping Corporation (Marinouki), Kerasies Shipping
Corporation (Kerasies) and Soffive Shipping Corporation (Soffive), and on
March 31, 2009, in relation to the credit facilities of Efragel Shipping
Corporation (Efragel), Avstes Shipping Corporation (Avstes), Pelea Shipping
Ltd. (Pelea), Marindou Shipping Corporation (Marindou), Eniaprohi Shipping
Corporation (Eniaprohi) and Eniadefhi Shipping Corporation (Eniadefhi).

Pursuant to
the supplemental agreements relating to the Marathassa, Marinouki, Kerasies and
Soffive loan facilities dated April 6, 2009, the basis of calculation of the Minimum
Value Covenant was amended, as 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. 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, the
Consolidated Net Worth Covenant and the Minimum Value Covenant and waived
compliance with these provisions until March 31, 2009. Under subsequent
supplemental agreements relating to these facilities, each

42

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dated March
31, 2009, the lender 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, the Consolidated Net Worth Covenant and the
EBITDA Covenant. Under these supplemental agreements, the respective borrowers
undertook to prepay on the next interest payment date relating to each of the
relevant credit facilities an amount sufficient to restore compliance with the
Minimum Value Covenant for each facility. The prepayments for each credit
facility totaled $22.1 million within the year ended December 31, 2009 and were
applied in order of maturity for the three principal payments following the
next rollover date and applied pro rata thereafter. In addition, in the event
that during the 12-month waiver period ending March 31, 2010, any charter
agreement of the Company is canceled, any of its terms are waived or the
charter rates under such charter agreement decrease, in order to continue
paying dividends, the Company must demonstrate to the lender at the time of
issuing its quarterly results that it has the necessary cash resources to meet
its 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. Under these supplemental agreements, compliance with the covenants
with respect to guarantees provided by the Company in relation to the Efragel,
Avstes, Marindou, Pelea, Eniadefhi and Eniaprohi credit facilities was waived
until March 31, 2010, inclusive.

As of December
31, 2009, the Company was in compliance with all debt covenants with respect to
its credit facilities. If the waivers in relation to the guarantees provided by
the Company with respect to the Efragel, Avstes, Marindou, Pelea and Eniadefhi
credit facilities had not been in place as of December 31, 2009, the
Company would still have been in compliance with all debt covenants as of that
date.

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 Notes 15 and 25(b) 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 and have recovered since then, although
they still remain at levels below the mid-2008 historic highs. The volatility
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. Demand for drybulk vessel services is
influenced by global financial conditions. During 2009, the rapid contraction
in the world economy and the expectation of declining growth or economic
decline in the Asian region reduced demand for drybulk services. Accordingly,
the recovery in China and India influenced positively the charter rates;
however, global financial conditions remain volatile and demand for drybulk
services may decrease in the future. The combination of increasing drybulk
capacity (both current and expected) and decreasing demand is likely 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 17 of our
financial statements included at the end of this annual report for more
information). Although as a result of early redelivery of these vessels, our
exposure to the relatively volatile spot market (compared to the time charter
market) was increased at that time, currently 11 of our 13 vessels are employed
or scheduled to be employed in period time charters of more than one year.
Additionally, 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 canceled. We have also restructured our
capital expenditure and debt commitments through the selective cancellation of
certain of our newbuild vessels and acquisition of certain others (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, 2009, we did not have any off-balance sheet arrangements.

43

---



F. Contractual Obligations

Our contractual obligations as of December 31, 2009 were:

|                             |  |                        |         |                          |   |                        |  |                        |         |                                              |   |        |  |   |         | 
|---------------------------- |  | ---------------------- | ------- | ------------------------ | - | ---------------------- |  | ---------------------- | ------- | -------------------------------------------- | - | ------ |  | - | ------- | 
|                             |  | Payments Due by Period |        
|                             |  |                        |        
|                             |  | Total                  |         | Less than 1
 year (2010) |   | 1-3 years
 (2011-2012) |  | 3-5 years
 (2013-2014) |         | More than 5
 years (After
 January 1,
 2015) |  
|                             |  |                        |         |                          |   |                        |  |                        |         |                                              |  
|                             |  | (Dollars in thousands) |        
|Long-term
 debt obligations  |  | $                      | 471,236 |                          | $ | 50,242                 |  | $                      | 49,778  |                                              | $ | 53,002 |  | $ | 318,214 | 
|Interest
 payments (1)       |  | $                      | 75,348  |                          | $ | 19,962                 |  | $                      | 26,315  |                                              | $ | 12,816 |  | $ | 16,255  | 
|Payments to
 our Manager (2) |  | $                      | 50,422  |                          | $ | 7,073                  |  | $                      | 12,641  |                                              | $ | 9,577  |  | $ | 21,131  | 
|Newbuild
 contracts          |  | $                      | 274,590 |                          | $ | 176,070                |  | $                      | 98,520  |                                              |   |       |  |   |        | 
|                             |  |                        |         |                          |   |                        |  |                        |         |                                              |   |        |  |   |         | 
|Total                        |  | $                      | 871,596 |                          | $ | 253,347                |  | $                      | 187,254 |                                              | $ | 75,395 |  | $ | 355,600 | 
|                             |  |                        |         |                          |   |                        |  |                        |         |                                              |   |        |  |   |         | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(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 0.43438% (the six-month LIBOR rate as
 of December 31, 2009), plus the relevant margin of the applicable credit
 facility. See B. Liquidity and Capital ResourcesInterest Rate Swaps.
 In addition, the interest payments include the estimated net settlement of
 our interest rate swaps.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(2) | Under our
 management agreement, for the initial two-year term to June 3, 2010, we
 pay 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 Eleni and 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 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, nor have they taken into account the 1% fee on charter party
 agreements which may be contracted subsequent to December 31, 2009.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

The following table sets forth, as of January 31, 2010, information regarding our directors
and executive officers.

|                          |  |     |  |                                                                     
|------------------------- |  | --- |  | --------------------------------------------------------------------
|Name                      |  | Age |  | Position                                                            
|                          |  |     |  |                                                                     
|                          |  |     |  |                                                                     
|Polys
 Hajioannou         |  | 43  |  | Chief
 Executive Officer, Chairman of the Board and Class I Director
|                          |  |     |  |                                                                     
|Dr. Loukas
 Barmparis     |  | 47  |  | President,
 Secretary and Class II Director                         
|                          |  |     |  |                                                                     
|Konstantinos
 Adamopoulos |  | 47  |  | Chief
 Financial Officer and Class III Director                     
|                          |  |     |  |                                                                     
|Ioannis
 Foteinos         |  | 51  |  | Chief
 Operating Officer and Class I Director                       
|                          |  |     |  |                                                                     
|John Gaffney              |  | 49  |  | Class II
 Director                                                  
|                          |  |     |  |                                                                     
|Frank Sica                |  | 59  |  | Class III
 Director                                                 
|                          |  |     |  |                                                                     
|Ole Wikborg               |  | 54  |  | Class I
 Director                                                   

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

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

44

---



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

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

Frank Sica has been a
member of our board of directors and of our corporate governance, nominating
and compensation committee, and a member and chairman of our audit committee,
since 2008. Mr. Sica has served as a Managing Partner at Tailwind Capital, a
private equity firm, since 2006. From 2004 to 2005, Mr. Sica was a Senior
Advisor to Soros Private Funds Management. From 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 private equity investments. From 1988 to 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. 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, 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 and manager of the marine and energy division of the
Zurich Protector Insurance Company ASA, based in Oslo and Zurich, and from 1993
until 1997 he served as a senior underwriter for the marine division of
Protector Insurance Company ASA, based in Oslo. Prior to his career in the
field of marine insurance, Mr. Wikborg served in the Royal Norwegian Navy,
attaining the rank of Lieutenant Commander.

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

B. Compensation of Directors and Senior
Management

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

45

---



In addition,
the chairman of the audit committee, Frank Sica, received, from the date of closing
    of our initial public offering on June 3, 2008 through September 30, 2008,
    the equivalent of $15,000 in the form of shares of our common stock. From
    October 1, 2008 through the date of the 2009 annual meeting of the shareholders
    of the Company, and for subsequent years measured from the date of the annual
    meeting of the shareholders of the Company, the chairman of the audit committee,
    Frank Sica, has received the annual equivalent of $60,000 in the form of
    shares of our common stock. Beginning on January 1, 2010, John Gaffney and
    Ole Wikborg will receive the annual equivalent of $30,000 in the form of
    shares of our common stock, payable in arrears on a quarterly basis as measured
    from that date. The members of our senior management have not received 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, 2009, we had seven members on our board of directors. The
board of directors may change the number of directors to not less than three,
nor more than 15, by a vote of a majority of the entire board. Each director
shall be elected to serve until the third succeeding annual meeting of
stockholders and until his or her successor shall have been duly elected and qualified,
except in the event of death, resignation or removal. A vacancy on the board
created by death, resignation, removal (which may only be for cause), or
failure of the stockholders to elect the entire class of directors to be
elected at any election of directors or for any other reason, may be filled
only by an affirmative vote of a majority of the remaining directors then in
office, even if less than a quorum, at any special meeting called for that
purpose or at any regular meeting of the board of directors. None of our
directors is a party to service contracts with us providing for benefits upon
termination of employment.

During the
fiscal year ended December 31, 2009, the full board of directors held five
meetings. Each director attended all of the meetings of committees of which the
director was a member. Our board of directors has determined that each of
Mr. Sica, Gaffney and Wikborg are independent within the current meanings
of independence employed by the corporate governance rules of the New York
Stock Exchange and the SEC.

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

Corporate Governance

The board of
directors and our Companys management have engaged in an ongoing review of our
corporate governance practices in order to oversee our compliance with the
applicable corporate governance rules of the New York Stock Exchange and
the SEC.

We have
adopted a number of key documents that are the foundation of the Companys
corporate governance, including:

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

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

Committees of the
Board of Directors

Audit committee

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

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

46

---



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

Corporate governance, nominating and
compensation committee

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

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

Other than
with an employee who serves as our legal representative in Greece, we have no
salaried employees and have not entered into any employment agreements. Our
Manager employs, and provides us with, all four of our executive officers,
including our chief executive officer, Polys Hajioannou, our president, Dr.
Loukas Barmparis, our chief financial officer, Konstantinos Adamopoulos, and
our chief operating officer, Ioannis Foteinos. Our Manager is responsible for
paying any salaries payable to our executive officers. Approximately 294
officers and crew members served on board the vessels we own as of
December 31, 2009, but are employed by our Manager.

E. Share Ownership

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

Equity Compensation
Plans

We have agreed
to provide the chairman of the audit committee, Mr. Frank Sica, as part of
his remuneration, the annual equivalent of $60,000 in the form of shares of our
common stock. Commencing on January 1, 2010, Mr. John Gaffney and Mr. Ole
Wikborg, as part of their
remuneration as non-management independent directors, will receive the annual
equivalent of $30,000 each, in the form of shares of our common stock.

47

---



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 January 31, 2010 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
January 31, 2010 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 54,514,643 shares of common stock outstanding as of
January 31, 2010. Information for certain holders is based on their latest
filings with the SEC or information delivered to us. Except as noted below, the
address of all stockholders, officers and directors identified in the table and
the accompanying footnotes below is in care of our principal executive offices.

|                                                            |  |                                           |            |                              |  |       |  
|----------------------------------------------------------- |  | ----------------------------------------- | ---------- | ---------------------------- |  | ----- | -
|Identity of
 Person or Group                                |  | Number of
 Shares
 of Common
 Stock Owned |            | Percentage
 of
 Common Stock | 
|                                                            |  |                                           |            |                              | 
|5% Beneficial Owners:                                       |  |                                           |            |                              |  |       |  
|                                                            |  |                                           |            |                              |  |       |  
|Vorini
 Holdings Inc. (1)                                   |  |                                           | 44,695,300 |                              |  | 81.99 | %
|                                                            |  |                                           |            |                              |  |       |  
|Nicolaos
 Hadjioannou (2)                                   |  |                                           | 44,695,300 |                              |  | 81.99 | %
|                                                            |  |                                           |            |                              |  |       |  
|Officers and Directors:                                     |  |                                           |            |                              |  |       |  
|                                                            |  |                                           |            |                              |  |       |  
|Polys
 Hajioannou (2)                                       |  |                                           | 44,695,300 |                              |  | 81.99 | %
|                                                            |  |                                           |            |                              |  |       |  
|Dr. Loukas
 Barmparis                                       |  |                                           |           |                              |  |      |  
|                                                            |  |                                           |            |                              |  |       |  
|Konstantinos
 Adamopoulos                                   |  |                                           |           |                              |  |      |  
|                                                            |  |                                           |            |                              |  |       |  
|Ioannis
 Foteinos                                           |  |                                           |           |                              |  |      |  
|                                                            |  |                                           |            |                              |  |       |  
|Frank Sica                                                  |  |                                           | 29,024     |                              |  | *     |  
|                                                            |  |                                           |            |                              |  |       |  
|Ole Wikborg                                                 |  |                                           |           |                              |  |      |  
|                                                            |  |                                           |            |                              |  |       |  
|John Gaffney                                                |  |                                           |           |                              |  |      |  
|                                                            |  |                                           |            |                              |  |       |  
|All executive officers and directors as a group (7 persons) |  |                                           | 44,724,324 |                              |  | 82.04 | %

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

In
June 2008, we completed a registered public offering of our shares of
common stock in which the selling stockholder was Vorini Holdings Inc., and our
common stock began trading on the New York Stock Exchange. Our major
stockholders have the same voting rights as our other stockholders. As of
January 31, 2010, we had four stockholders of record. Three of these
stockholders of record were located in the United States and held an aggregate
10,012,931 shares of common stock, representing approximately 18.37% 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 10,008,607 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.

48

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Vorini
Holdings Inc. owns approximately 81.99% of our outstanding common stock. This
stockholder is able to control the outcome of matters on which our stockholders
are entitled to vote, including the election of our entire board of directors
and other significant corporate actions. Shares of our common stock held by
Vorini Holdings Inc. do not have different or unique voting rights.

B. Related Party Transactions

Management
Affiliations

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

Management Agreement

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

Technical Services

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

Commercial Services

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

Administrative Services

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

49

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Reporting Structure

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

Compensation of Our Manager

Under our
management agreement, in return for providing technical, commercial and
administrative services, our Manager receives a fee of $575 per vessel per day
for vessels in our fleet, prorated for the number of calendar days that we own
or charter-in each vessel and $250 per vessel per day, for bareboat charters.
Our Manager also 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 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. Such notice of termination has not been provided to our
Manager by us.

Our Managers Termination Rights

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

|                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|-------------------------------------------------------------------------------------------------------------- | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                               |  | any money
 payable by us is not paid when due or if due on demand, within ten business
 days following demand by our Manager;                                                                                                                                                                                                                                                                                        
|                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                               |  | we default
 in the performance of any other material obligation under the management agreement
 and the matter is unresolved within 20 business days after we receive written
 notice of such default from our Manager;                                                                                                                                                                                              
|                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                               |  | the
 management fee determined by arbitration in respect of any annual period
 following the initial term is unsatisfactory to our Manager, in which case
 the Manager may terminate upon 12 months written notice to us;                                                                                                                                                                                           
|                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                               |  | any
 acquisition of our shares or a merger, consolidation or similar transaction
 results in any person or group acquiring 40% or more
 of the total voting power of our or the resulting entitys outstanding
 voting securities, and such percentage represents a higher percentage of such
 voting power than that held directly or indirectly by Polys Hajionnaou and
 Nicolaos Hadjioannou, collectively; or
|                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                               |  | there is a
 change in directors after which a majority of the members of our board of
 directors are not continuing directors.                                                                                                                                                                                                                                                                                       
|                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|Continuing
 directors means, as of any date of determination, any member of our board of
 directors who was:
|                                                                                                              
|                                                                                                               |  | a member of
 our board of directors on June 4, 2008; or                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                               |  | nominated
 for election or elected to our board of directors with the approval of a
 majority of the directors then in office who were either directors on June 4,
 2008 or whose nomination or election was previously so approved.                                                                                                                                                                                 

50

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Our Termination Rights

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

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

Non-Competition

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

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

Our Manager
has also agreed that if one of our drybulk vessels and a drybulk vessel owned
or operated by a company affiliated with our chief executive officer or Nicolaos
    Hadjioannou are both available and meet the criteria for a charter being
    fixed by our Manager, our drybulk vessel will receive such charter. In October
    2009, Nicolaos Hadjioannou acquired a secondhand Panamax class vessel which
    receives limited management services from our Manager.

Currently our
Manager provides certain management services to two vessels operated by an
unaffiliated third party (see Restrictive Covenant Agreements below)
pursuant to a waiver of the relevant provisions of the Management Agreement,
approved by our independent directors, and one vessel operated by an affiliated
third party (described above).

Sale of Our Manager

Our Manager
has agreed that, during the term of the management agreement and for one year
after its termination, our Manager will not transfer, assign, sell or dispose
of all or substantially all of its business that is necessary for the
performance of its services under the management agreement without the prior
written consent of our board of directors. Furthermore, during such period, in
the event of any proposed change in control of our Manager, we have a 30-day
right of first offer to purchase our Manager.

For these
purposes, a proposed change in control of our Manager means (a) the
approval of the board of directors of our Manager or the stockholders of our
Manager of a proposed sale of all or substantially all of the assets or property
of our Manager necessary for the performance of its services under the management
agreement, (b) the approval of our Managers stockholders of a proposed
sale of our Managers shares that would result in Polys Hajioannou and Nicolaos
Hadjioannou, collectively, owning less than 80% of the outstanding
voting securities of our Manager or (c) the approval of our Managers
stockholders of a proposed merger, consolidation or similar transaction, as a
result of which Polys Hajioannou and Nicolaos Hadjioannou, directly or indirectly,
collectively, would beneficially own less than 80% of the outstanding voting
securities of the resulting entity following such transaction.

Restrictive Covenant
Agreements

Under
restrictive covenant agreements entered into with us, Polys Hajioannou, Vorini
    Holdings Inc., Machairiotissa Holdings Inc., or any entity controlled by,
    or under common control with, any of the above (together, the Hajioannou
    Entities), have agreed to restrictions on their ownership or operation of
    any drybulk vessels or the acquisition, investment in or control of any business
    involved in the ownership or operation of drybulk vessels, subject to the
exceptions described below.

In the case of
Polys Hajioannou, the restricted period continues until the later of (a) one
year following the termination of the management agreement and (b) one year
following the termination of his services and employment with us. In the case
of the Hajioannou Entities, the restricted period continues until one
year following the termination of the management agreement. Notwithstanding
these restrictions, Polys Hajioannou and the Hajioannou Entities are
permitted to engage in the restricted activities during the restricted periods
in the following circumstances:

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

51

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

As noted
above, Polys Hajioannou and the Hajioannou Entities are permitted to
engage in restricted activities with respect to two types of permitted
acquisitions. One such permitted acquisition is an acquisition of a drybulk
vessel or an acquisition or investment in a drybulk vessel business on terms
and conditions as to price that are not more favorable, and on such other terms
and conditions that are not materially more favorable, than those first offered
to us and refused by a majority of our independent directors. The second type
of permitted acquisition is an acquisition of a group of vessels or a business
that includes non-drybulk vessels and non-drybulk vessel businesses, provided
that less than 50% of the fair market value of the acquisition is attributable
to drybulk vessels or drybulk vessel businesses. Under this second type of
permitted acquisition, we must be promptly given the opportunity to buy the
drybulk vessels or drybulk vessel businesses included in the acquisition for
their fair market value plus certain break-up costs.

Polys
Hajioannou and the Hajioannou Entities have also agreed that if one of
our drybulk vessels and a drybulk vessel owned or operated by any of the
Hajioannou Entities are both available and meet the criteria for a charter
being fixed by our Manager, our drybulk vessels will receive such charter.

In February
2009, pursuant to the terms of the restrictive covenant agreements, a committee
comprised of the independent directors of the Company, and subsequently the
full board of directors of the Company, decided to refuse an offer to purchase
a business, which at the time was wholly-owned by Polys Hajioannou and Nicolaos
Hadjioannou, of chartering-in and chartering-out unrelated third-party vessels.
The business was subsequently sold to an unaffiliated third party. Two vessels
operated by this business receive limited management services from our Manager
pursuant to a waiver of our Management Agreements relevant provisions,
approved by our independent directors.

Registration Rights
Agreement

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

C. Interests of Experts and Counsel

Not
applicable.

ITEM 8. FINANCIAL
INFORMATION

A. Consolidated Statements and Other
Financial Information

See Item 18.
Financial Statements below.

Legal Proceedings

We have not
been involved in any legal proceedings which may have, or have had, a
significant effect on our business, financial position, results of operations
or liquidity, nor are we aware of any proceedings that are pending or
threatened which may have a significant effect on our business, financial
position, results of operations or liquidity.

The nature of
our business exposes us to the risk of lawsuits for damages or penalties
relating to, among other things, personal injury, property casualty and
environmental contamination. From time to time, we may be subject to legal
proceedings and claims in the ordinary course of business, principally personal
injury and property casualty claims. We expect that these claims would be
covered by insurance, subject to customary deductibles. However, such claims,
even if lacking merit, could result in the expenditure of significant financial
and managerial resources.

Dividend Policy

We paid our
first quarterly dividend as a public company of $0.1461 per share in August
2008 and subsequent dividends of $0.475 per share in November 2008 and $0.15
per share in February 2009, May 2009, August 2009 and November 2009. We also
declared a dividend of
$0.15 per share on February 9, 2010, for the shareholders of record on February
19, 2010, payable on or about February 26, 2010.

52

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

B. Significant Changes

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

ITEM 9. THE OFFER AND
LISTING

Trading on the New York Stock Exchange

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

|                         |  |             |       |     |   |       | 
|------------------------ |  | ----------- | ----- | --- | - | ----- | 
|                         |  | Price Range |      
|                         |  |             |      
|                        
|                         |  | High        |       | Low |  
|                         |  |             |       |     |  
|                         |  |             |       |     |   |       | 
|2008 (1)                 |  | $           | 19.05 |     | $ | 3.27  | 
|2009                     |  |             | 9.40  |     |   | 2.81  | 
|                         |  |             |       |     |   |       | 
|Second Quarter
 2008 (1) |  |             | 19.00 |     |   | 17.97 | 
|Third
 Quarter 2008      |  |             | 19.05 |     |   | 10.90 | 
|Fourth
 Quarter 2008     |  |             | 11.35 |     |   | 3.27  | 
|First
 Quarter 2009      |  |             | 8.75  |     |   | 2.81  | 
|Second
 Quarter 2009     |  |             | 7.95  |     |   | 3.17  | 
|Third
 Quarter 2009      |  |             | 8.62  |     |   | 6.02  | 
|Fourth
 Quarter 2009     |  |             | 9.40  |     |   | 6.92  | 
|                         |  |             |       |     |   |       | 
|August 2009              |  |             | 8.62  |     |   | 7.33  | 
|September 2009           |  |             | 8.57  |     |   | 6.77  | 
|October
 2009            |  |             | 8.45  |     |   | 6.96  | 
|November
 2009           |  |             | 9.40  |     |   | 6.92  | 
|December
 2009           |  |             | 9.03  |     |   | 8.16  | 
|January
 2010            |  |             | 9.11  |     |   | 7.91  | 

|    |                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------
|(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, 2009 and January 31, 2010, 54,512,931and 54,514,643 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
January 31, 2010, 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.

53

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B. Memorandum and Articles of Association

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

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

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

Directors

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

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

Common Stock

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

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

Preferred Stock

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

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

54

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

Stockholder Rights
Plan

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

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

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

Detachment of rights

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

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

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

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

Until the
rights distribution date:

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

55

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

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

Flip-in event

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

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

Flip-over event

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

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

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

Antidilution

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

Redemption of rights

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

56

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Exchange of rights

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

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

Amendment of terms of rights

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

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

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

Dissenters Rights of Appraisal and Payment

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

Stockholders
Derivative Actions

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

Limitations on
Liability and Indemnification of Officers and Directors

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

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

57

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

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

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

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

Blank check preferred stock

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

Classified board of directors

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

Election and removal of directors

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

Calling of special meeting of stockholders

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

Advance notice requirements for stockholder
proposals and director nominations

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

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

58

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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 Inc., 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) | 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.                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                     
| | (e) | Registration
 Rights Agreement, dated May 14, 2008, between Safe Bulkers, Inc. and
 Vorini Holdings Inc. 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.                                                                              

D. Exchange Controls and Other Limitations
Affecting Security Holders

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

E. Tax Considerations

Marshall Islands Tax
Considerations

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

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

Liberian Tax
Considerations

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

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

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

59

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United States Federal
Income Tax Considerations

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

Taxation of Our Shipping Income

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 that we are
required to pay in respect of the vessel subject to the relevant charter.

60

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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.

United
States Federal Income Taxation of U.S. Holders

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

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

Distributions on Our Common Stock

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

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

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

61

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

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

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

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

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

Sale, Exchange or other Disposition of Common
Stock

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

PFIC Status

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

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

62

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

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

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

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

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

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

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

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

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

63

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Taxation of U.S. Holders That Make No
Election

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

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

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

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

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

Distributions on Our Common Stock

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

Sale, Exchange or Other Disposition of Our
Common Stock

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

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

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

United States Backup
Withholding and Information Reporting

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

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

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

64

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

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

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

F. Dividends and Paying Agents

Not
applicable.

G. Statement by Experts

Not
applicable.

H. Documents on Display

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

I. Subsidiary Information

Not
applicable.

65

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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 13 interest rate swap
agreements as of December 31, 2009, compared to 11 interest rate swap
agreements as of December 31, 2008, 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, 2009 was $452.5
million. The swaps have specified rates and durations. Refer to the table in
Note 15 of our financial statements included at the end of this annual report
which summarizes the interest rate swaps in place as of December 31, 2009 and
December 31, 2008.

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

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

Through these
swap transactions, we effectively hedged the interest rate exposure of 96% of
our loans outstanding as of December 31, 2009. On January 7, 2010 we prepaid in
full the credit facility secured by our vessel Efrossini, concurrently with
her sale and delivery to her new owners. The relevant interest rate swap
transaction was novated and amended to hedge the interest rate risk in relation
to the credit facility secured by our vessel Andreas K(refer to Note
25(b) of our financial statements at the end of this annual report).

The following
table sets forth the sensitivity of our existing loans as of December 31, 2009
as to a 100 basis point increase in LIBOR during the next five years, and
reflects the additional interest expense.

|     |  |        |            
|---- |  | ------ | -----------
|Year |  | Amount
|     |  |       
|2010 |  | $      | 0.0 million
|2011 |  | $      | 0.8 million
|2012 |  | $      | 2.5 million
|2013 |  | $      | 3.0 million
|2014 |  | $      | 3.2 million

Foreign Currency
Exchange Risk

We generate
all of our revenues in U.S. dollars, but for the year ended December 31, 2009
we incurred approximately 20.24% of our vessel operating expenses in currencies
other than the U.S. dollar. As of December 31, 2009, approximately 12.12% of
our outstanding accounts payable were denominated in currencies other than the
U.S. dollar. Our 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, 2009, would have increased our vessel
operating expenses by approximately $397,300 and the fair value of our outstanding
    accounts payable by approximately $31,900.

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.

66

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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. Material Modifications to the Rights of Security
Holders

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

ITEM 15. CONTROLS AND
PROCEDURES

A. Disclosure Controls and Procedures

Our
management, with the participation of our chief executive officer and chief
financial officer, has evaluated the effectiveness of the design and operation
of our disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act as of December 31, 2009. Disclosure controls
and procedures are defined under SEC rules as controls and other procedures
that are designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within required time periods.
Disclosure controls and procedures include controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuers management, including its principal executive and principal
financial officers, or persons performing similar functions, as appropriate, to
allow timely decisions regarding required disclosure. There are inherent
limitations to the effectiveness of any system of disclosure controls and
procedures, including the possibility of human error and the circumvention or
overriding of the controls and procedures. Accordingly, even effective
disclosure controls and procedures can only provide reasonable assurance of
achieving their control objectives.

Based on our
evaluation, the chief executive officer and the chief financial officer have
concluded that our disclosure controls and procedures were effective as of
December 31, 2009.

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

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

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

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

In
making its assessment of our internal control over financial reporting as of
December 31, 2009, management, including the chief executive officer and chief
financial officer, used the criteria set forth in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).

Management
concluded that, as of December 31, 2009, our internal control over financial
reporting was effective.

Deloitte Hadjipavlou,
Sofianos & Cambanis S.A. (Deloitte), our independent registered public
accounting firm, has audited the financial statements included herein and our
internal control over financial reporting and has issued an attestation report
on the effectiveness of our internal control over financial reporting as of
December 31, 2009 which is reproduced in its entirety in Item 15(c) below.

67

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C. Attestation Report of the
Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the internal
control over financial reporting of Safe Bulkers, Inc., and its subsidiaries
    (the
Company) as of December 31, 2009, based on criteria established in Internal
Control  Integrated Frameworkissued
by the Committee of Sponsoring Organizations of the Treadway Commission. The
Companys management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying
Managements Annual Report on Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the Companys internal control
over financial reporting based on our audit.

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

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

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

In our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2009, based on the criteria established in Internal Control  Integrated Frameworkissued
by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements as of and for the year
ended December 31, 2009 of the Company and our report dated February 23, 2010
expressed an unqualified opinion on those financial statements.

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

February 23, 2010

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.

68

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ITEM 16A. AUDIT COMMITTEE
FINANCIAL EXPERT

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

ITEM 16B. CODE OF ETHICS

We have
adopted a Code of Business Conduct and Ethics for all officers and employees of
our company, which incorporates a Code of Ethics for directors and a Code of
Conduct for corporate officers, a copy of which is posted on our website, and
may be viewed at http://www.safebulkers.com/corp-ethics.htm.
We will also provide a paper copy of this document free of charge upon written
request by our stockholders. Stockholders may direct their requests to the
attention of Dr. Loukas Barmparis, Secretary, Safe Bulkers, Inc., 32 Avenue
Karamanli, 16605, Voula, Athens, Greece. No waivers of the Code of Business
Conduct and Ethics have been granted to any person during the fiscal year ended
December 31, 2009.

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, 2008 and 2009.

The chart
below sets forth the total amount billed and accrued for the Deloitte,
Hadjipavlou, Sofianos & Cambanis S.A. services performed in 2008 and 2009
and breaks down these amounts by the category of service.

|                    |  |                |     |      |   |    
|------------------- |  | -------------- | --- | ---- | - | ---
|                    |  | 2008           |     | 2009
|                    |  |                |     |     
|                    |  | (In Thousands)
|Audit fees          |  | $              | 872 |      | $ | 579
|Audit-related
 fees |  |                |    |      |   | 116
|Tax fees            |  |                |    |      |   |   
|All other
 fees     |  |                |    |      |   |   
|Total fees          |  | $              | 872 |      | $ | 695

Audit Fees

Audit fees represent
compensation for professional services rendered for the audit of the
combined and consolidated financial statements of the Company and for the
review of the quarterly financial information as well as in connection with the
review of the of registration statements and related consents and comfort letters and any other audit services
required for SEC or other regulatory filings. We filed our Registration
Statement on Form F-1 (Reg. No. 333-150995), with the SEC in the first half of
2008 and Registration Statement on Form F-3 (Reg. No. 333-162381), in the third
quarter of 2009.

Audit-related fees

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

Pre-approval
Policies and Procedures

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

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

Not
Applicable.

69

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

On June 10, 2009, the Company announced that Vorini Holdings Inc.
authorized a program under which it may from time to time purchase shares of
the Companys common stock. The maximum number of shares of common stock that
can be purchased under the program represented approximately 2% of the
Companys shares outstanding and 10.9% of its public float as of June 10, 2009.
As of June 10, 2009, the Company had 54,508,907 shares of common stock
outstanding. Approximately 44,533,907 of those shares, or 81.7% of common stock
outstanding, were held by the Companys affiliates, according to information
provided to the Company by such affiliates. The remaining 9,975,000 shares, or
18.3% of common stock outstanding, represented the public float. The program is
still in effect and details on the shares purchased in 2009 pursuant to the
program are set forth in the table below. There were no such purchases
conducted outside of the program.

|          |  |                                                      |  |                                            |  |                                                                                                     |      |                                                                                                                                     |  |         |  |  |         |  | 
|--------- |  | ---------------------------------------------------- |  | ------------------------------------------ |  | --------------------------------------------------------------------------------------------------- | ---- | ----------------------------------------------------------------------------------------------------------------------------------- |  | ------- |  |  | ------- |  | 
|Period    |  | Total
 Number of 
 Shares (or Units) 
 Purchased (a) |  | Average
 Price Paid per 
 Share (or Units) |  | Total
 Number of
 Shares (or Units) 
 Purchased as Part of 
 Publicly Announced 
 Plans or Programs |      | Maximum
 Number (or 
 Approximate Dollar 
 Value) of Shares ( or 
 Units) that May Yet Be 
 Purchased Under the 
 Plans or Programs | 
|          |  |                                                      |  |                                            |  |                                                                                                     |      |                                                                                                                                     |  |         |  |  |        
|2009      |  |                                                      |  |                                            |  |                                                                                                     |      |                                                                                                                                     |  |         |  |  |        
|          |  |                                                      |  |                                            |  |                                                                                                     |      |                                                                                                                                     |  |         |  |  |        
|June      |  | 152,900                                              |  |                                            |  | $                                                                                                   | 6.28 |                                                                                                                                     |  | 152,900 |  |  | 927,100 |  | 
|          |  |                                                      |  |                                            |  |                                                                                                     |      |                                                                                                                                     |  |         |  |  |         |  | 
|July      |  | 41,500                                               |  |                                            |  | $                                                                                                   | 6.12 |                                                                                                                                     |  | 41,500  |  |  | 885,600 |  | 
|          |  |                                                      |  |                                            |  |                                                                                                     |      |                                                                                                                                     |  |         |  |  |         |  | 
|August    |  |                                                     |  |                                            |  |                                                                                                     |     |                                                                                                                                     |  |        |  |  |        |  | 
|          |  |                                                      |  |                                            |  |                                                                                                     |      |                                                                                                                                     |  |         |  |  |         |  | 
|September |  |                                                     |  |                                            |  |                                                                                                     |     |                                                                                                                                     |  |        |  |  |        |  | 
|          |  |                                                      |  |                                            |  |                                                                                                     |      |                                                                                                                                     |  |         |  |  |         |  | 
|October   |  |                                                     |  |                                            |  |                                                                                                     |     |                                                                                                                                     |  |        |  |  |        |  | 
|          |  |                                                      |  |                                            |  |                                                                                                     |      |                                                                                                                                     |  |         |  |  |         |  | 
|November  |  | 900                                                  |  |                                            |  | $                                                                                                   | 7.00 |                                                                                                                                     |  | 900     |  |  | 884,700 |  | 
|          |  |                                                      |  |                                            |  |                                                                                                     |      |                                                                                                                                     |  |         |  |  |         |  | 
|December  |  |                                                     |  |                                            |  |                                                                                                     |     |                                                                                                                                     |  |        |  |  |        |  | 

(a) All
purchases have been made on the open market within the safe harbor provisions
of Regulation 10b-18 under the Exchange Act.

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.

70

---



Independent
Directors

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

Executive Sessions

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

Corporate
Governance, Nominating and Compensation Committee

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

71

---



PART III

ITEM 17. FINANCIAL
STATEMENTS

Not
Applicable.

ITEM 18. FINANCIAL
STATEMENTS

Reference is
made to pages F-1 through F-27 included herein by reference.

ITEM 19. EXHIBITS

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

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

72

---



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.

February 23, 2010

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

73

---



INDEX TO FINANCIAL STATEMENTS

|                                                                                                                   |  |     
|------------------------------------------------------------------------------------------------------------------ |  | ----
|                                                                                                                   |  | Page
|                                                                                                                   |  |     
|                                                                                                                   |  |     
|Report of Independent Registered Public Accounting Firm                                                            |  | F-2 
|                                                                                                                   |  |     
|Consolidated Balance Sheets as of December 31, 2008 and 2009                                                       |  | F-3 
|                                                                                                                   |  |     
|Combined and Consolidated Statements of Income for the years ended
 December 31, 2007, 2008 and 2009               |  | F-4 
|                                                                                                                   |  |     
|Combined and Consolidated Statements of Shareholders Equity for the
 years ended December 31, 2007, 2008 and 2009 |  | F-5 
|                                                                                                                   |  |     
|Combined and Consolidated Statements of Cash Flows for the years
 ended December 31, 2007, 2008 and 2009           |  | F-6 
|                                                                                                                   |  |     
|Notes to Combined and Consolidated Financial Statements                                                            |  | F-7 

F-1

---



REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

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

We have
audited the accompanying consolidated balance sheets of Safe Bulkers, Inc. and
its subsidiaries (the Company) as of December 31, 2008 and 2009, 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,
2009. The combined and consolidated financial statements include the operations
of the Additional Companies defined in Note 1 to the accompanying financial
statements. 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. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our
opinion, such combined and consolidated financial statements present fairly,
    in all material respects, the financial position of the Company as of December
    31, 2008 and 2009, and the results of the operations and cash flows
    of the Company and the Additional Companies for each of the three years in
    the period ended December 31,
    2009, in conformity with accounting principles generally accepted in the
    United States of America.

We have also audited, in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Companys internal control over financial reporting
as of December 31, 2009, based on the criteria established in Internal ControlIntegrated
Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated February 23, 2010 expressed an unqualified opinion on
the Companys internal control over financial reporting.

/s/ Deloitte Hadjipavlou, Sofianos &
Cambanis S.A.Athens, Greece
February 23, 2010

F-2

---



SAFE
BULKERS, INC. 
CONSOLIDATED BALANCE SHEETS 
DECEMBER 31, 2008 AND 2009 
(In thousands of U.S. Dollars, except for share and per share data)

|                                                                                                                                                       |  |       |    |      |               |         |   |  |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----- | -- | ---- | ------------- | ------- | - |  | ------- | 
|                                                                                                                                                       |  |       |    |      | December
 31, |        
|                                                                                                                                                       |  |       |    |      |               |        
|                                                                                                                                                       |  | Notes |    | 2008 |               | 2009    |  
|                                                                                                                                                       |  |       |    |      |               |         |  
|ASSETS                                                                                                                                                 |  |       |    |      |               |         |   |  |         | 
|CURRENT ASSETS:                                                                                                                                        |  |       |    |      |               |         |   |  |         | 
|Cash and cash equivalents                                                                                                                              |  |       |    |      |               | 27,702  |   |  | 18,435  | 
|Time deposits  short term                                                                                                                             |  |       |    |      |               | 21,274  |   |  | 57,887  | 
|Accounts receivable trade, net                                                                                                                         |  |       |    |      |               | 528     |   |  | 1,905   | 
|Asset held for sale                                                                                                                                    |  |       | 6  |      |               |        |   |  | 16,969  | 
|Due from Manager                                                                                                                                       |  |       | 3  |      |               | 112     |   |  |        | 
|Inventories                                                                                                                                            |  |       |    |      |               | 1,189   |   |  | 1,245   | 
|Accrued revenue                                                                                                                                        |  |       | 21 |      |               | 3,938   |   |  | 1,693   | 
|Restricted cash                                                                                                                                        |  |       |    |      |               | 32,629  |   |  | 6,392   | 
|Prepaid expenses and other current assets                                                                                                              |  |       |    |      |               | 714     |   |  | 1,122   | 
|Total current assets                                                                                                                                   |  |       |    |      |               | 88,086  |   |  | 105,648 | 
|                                                                                                                                                       |  |       |    |      |               |         |   |  |         | 
|FIXED ASSETS:                                                                                                                                          |  |       |    |      |               |         |   |  |         | 
|Vessels, net                                                                                                                                           |  |       | 4  |      |               | 286,955 |   |  | 373,924 | 
|Advances for vessel acquisition and vessels
 under construction                                                                                        |  |       | 5  |      |               | 100,194 |   |  | 93,520  | 
|Other fixed assets, net                                                                                                                                |  |       | 7  |      |               | 147     |   |  | 69      | 
|Total fixed assets                                                                                                                                     |  |       |    |      |               | 387,296 |   |  | 467,513 | 
|                                                                                                                                                       |  |       |    |      |               |         |   |  |         | 
|OTHER NON CURRENT ASSETS:                                                                                                                              |  |       |    |      |               |         |   |  |         | 
|Deferred finance charges, net                                                                                                                          |  |       | 8  |      |               | 773     |   |  | 677     | 
|Restricted cash                                                                                                                                        |  |       |    |      |               | 4,750   |   |  | 4,763   | 
|Derivative assets                                                                                                                                      |  |       | 15 |      |               | 1,377   |   |  | 123     | 
|Long-term investment                                                                                                                                   |  |       | 10 |      |               |        |   |  | 50,000  | 
|Total assets                                                                                                                                           |  |       |    |      |               | 482,282 |   |  | 628,724 | 
|                                                                                                                                                       |  |       |    |      |               |         |   |  |         | 
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                   |  |       |    |      |               |         |   |  |         | 
|CURRENT LIABILITIES:                                                                                                                                   |  |       |    |      |               |         |   |  |         | 
|Current portion of long-term debt                                                                                                                      |  |       | 9  |      |               | 54,807  |   |  | 15,742  | 
|Liability directly associated with asset
 held for sale                                                                                                |  |       | 9  |      |               |        |   |  | 34,500  | 
|Unearned revenue                                                                                                                                       |  |       | 21 |      |               | 8,451   |   |  | 3,973   | 
|Trade accounts payable                                                                                                                                 |  |       |    |      |               | 1,575   |   |  | 2,668   | 
|Accrued liabilities                                                                                                                                    |  |       | 16 |      |               | 6,030   |   |  | 7,426   | 
|Derivative liability                                                                                                                                   |  |       | 15 |      |               |        |   |  | 1,223   | 
|Due to Manager                                                                                                                                         |  |       | 3  |      |               |        |   |  | 19      | 
|Total current liabilities                                                                                                                              |  |       |    |      |               | 70,863  |   |  | 65,551  | 
|                                                                                                                                                       |  |       |    |      |               |         |   |  |         | 
|Derivative liabilities                                                                                                                                 |  |       | 15 |      |               | 21,716  |   |  | 15,510  | 
|Long-term debt, net of current portion                                                                                                                 |  |       | 9  |      |               | 413,483 |   |  | 420,994 | 
|Unearned revenue  Long-term                                                                                                                           |  |       | 21 |      |               | 11,765  |   |  | 29,450  | 
|Total liabilities                                                                                                                                      |  |       |    |      |               | 517,827 |   |  | 531,505 | 
|                                                                                                                                                       |  |       |    |      |               |         |   |  |         | 
|COMMITMENTS AND CONTINGENCIES                                                                                                                          |  |       | 12 |      |               |        |   |  |        | 
|SHAREHOLDERS (DEFICIT) / EQUITY:                                                                                                                      |  |       |    |      |               |         |   |  |         | 
|Shareholders equity:                                                                                                                                  |  |       |    |      |               |         |   |  |         | 
|Common stock, $0.001 par value; 200,000,000
 authorized, 54,501,334 and 54,512,931 issued and outstanding at December 31,
 2008 and 2009, respectively |  |       | 11 |      |               | 55      |   |  | 55      | 
|Preferred stock, $0.01 par value;
 20,000,000 authorized, none issued or outstanding as of December 31, 2008 and
 2009                                 |  |       |    |      |               |        |   |  |        | 
|Additional paid in capital                                                                                                                             |  |       |    |      |               | 30      |   |  | 90      | 
|Retained (deficit) / earnings                                                                                                                          |  |       |    |      |               | (35,630 | ) |  | 97,074  | 
|Total shareholders (deficit) / equity                                                                                                                 |  |       |    |      |               | (35,545 | ) |  | 97,219  | 
|                                                                                                                                                       |  |       |    |      |               |         |   |  |         | 
|Total liabilities and shareholders (deficit) / equity                                                                                                 |  |       |    |      |               | 482,282 |   |  | 628,724 | 
|                                                                                                                                                       |  |       |    |      |               |         |   |  |         | 

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

F-3

---



SAFE
BULKERS, INC. 
COMBINED AND CONSOLIDATED STATEMENTS OF INCOME 
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In thousands of U.S. Dollars, except for share and per share data)

|                                                        |  |       |       |                          |  |            |   |      |            |   |  |            |  
|------------------------------------------------------- |  | ----- | ----- | ------------------------ |  | ---------- | - | ---- | ---------- | - |  | ---------- | -
|                                                        |  |       |       | Year Ended
 December 31, | 
|                                                        |  |       |       |                          | 
|                                                        |  | Notes |       | 2007                     |  | 2008       |   | 2009 |           
|                                                        |  |       |       |                          |  |            |   |      |           
|                                                        |  |       |       |                          |  |            |   |      |            |   |  |            |  
|REVENUES:                                               |  |       |       |                          |  |            |   |      |            |   |  |            |  
|Revenues                                                |  |       | 13    |                          |  | 172,057    |   |      | 208,411    |   |  | 168,400    |  
|Commissions                                             |  |       |       |                          |  | (6,209     | ) |      | (7,639     | ) |  | (3,794     | )
|                                                        |  |       |       |                          |  |            |   |      |            |   |  |            |  
|Net revenues                                            |  |       |       |                          |  | 165,848    |   |      | 200,772    |   |  | 164,606    |  
|                                                        |  |       |       |                          |  |            |   |      |            |   |  |            |  
|EXPENSES:                                               |  |       |       |                          |  |            |   |      |            |   |  |            |  
|Voyage expenses                                         |  |       |       |                          |  | (179       | ) |      | (273       | ) |  | (577       | )
|Vessel operating expenses                               |  |       | 14    |                          |  | (12,429    | ) |      | (17,615    | ) |  | (19,628    | )
|Depreciation                                            |  |       | 4, 7  |                          |  | (9,583     | ) |      | (10,614    | ) |  | (13,893    | )
|General and administrative expenses                     |  |       |       |                          |  |            |   |      |            |   |  |            |  
|-Management fee to related party                        |  |       | 3, 20 |                          |  | (1,177     | ) |      | (4,420     | ) |  | (4,436     | )
|-Third party expenses                                   |  |       | 20    |                          |  | (2,477     | ) |      | (3,625     | ) |  | (2,610     | )
|Early redelivery (cost) / income                        |  |       | 17    |                          |  | (21,438    | ) |      | (565       | ) |  | 74,951     |  
|Loss on asset purchase cancellations                    |  |       | 18    |                          |  |           |   |      |           |   |  | (20,699    | )
|Gain on sale of assets                                  |  |       | 22    |                          |  | 112,360    |   |      |           |   |  |           |  
|                                                        |  |       |       |                          |  |            |   |      |            |   |  |            |  
|Operating income                                        |  |       |       |                          |  | 230,925    |   |      | 163,660    |   |  | 177,714    |  
|                                                        |  |       |       |                          |  |            |   |      |            |   |  |            |  
|OTHER (EXPENSE)/ INCOME:                                |  |       |       |                          |  |            |   |      |            |   |  |            |  
|Interest expense                                        |  |       | 9     |                          |  | (8,225     | ) |      | (16,392    | ) |  | (10,342    | )
|Other finance costs                                     |  |       |       |                          |  | (161       | ) |      | (408       | ) |  | (442       | )
|Interest income                                         |  |       |       |                          |  | 1,290      |   |      | 1,492      |   |  | 2,164      |  
|Loss on derivatives                                     |  |       | 15    |                          |  | (704       | ) |      | (19,509    | ) |  | (4,416     | )
|Foreign currency (loss)/gain                            |  |       |       |                          |  | (13,759    | ) |      | (9,501     | ) |  | 838        |  
|Amortization and write-off of deferred
 finance charges |  |       | 8     |                          |  | (166       | ) |      | (131       | ) |  | (106       | )
|                                                        |  |       |       |                          |  |            |   |      |            |   |  |            |  
|Net income                                              |  |       |       |                          |  | 209,200    |   |      | 119,211    |   |  | 165,410    |  
|                                                        |  |       |       |                          |  |            |   |      |            |   |  |            |  
|Earnings per share in U.S. Dollars, basic and diluted   |  |       | 24    |                          |  | 3.84       |   |      | 2.19       |   |  | 3.03       |  
|Weighted average number of shares, basic and diluted    |  |       |       |                          |  | 54,500,000 |   |      | 54,500,889 |   |  | 54,510,587 |  

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

F-4

---



SAFE BULKERS, INC. COMBINED AND CONSOLIDATED STATEMENTS 
OF SHAREHOLDERS EQUITY FOR THE YEARS 
ENDED DECEMBER 31, 2007, 2008 AND 2009 
(In thousands of U.S. Dollars, except for per share data)

|                                |  |              |    |                             |  |                    |  |       |          |   |  |          |  
|------------------------------- |  | ------------ | -- | --------------------------- |  | ------------------ |  | ----- | -------- | - |  | -------- | -
|                                |  | Common Stock |    | Additional
 Paid in Capital |  | Retained
 Earnings |  | Total |         
|                                |  |              |    |                             |  |                    |  |       |         
|Balance as
 of January 1, 2007  |  |              |   |                             |  |                   |  |       | 229,051  |   |  | 229,051  |  
|Net income
 for the year        |  |              |   |                             |  |                   |  |       | 209,200  |   |  | 209,200  |  
|Dividends
 ($7.04 per share)    |  |              |   |                             |  |                   |  |       | (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
 ($3.83 per share)    |  |              |   |                             |  |                   |  |       | (209,239 | ) |  | (209,239 | )
|Balance as of December 31, 2008 |  |              | 55 |                             |  | 30                 |  |       | (35,630  | ) |  | (35,545  | )
|                                |  |              |    |                             |  |                    |  |       |          |   |  |          |  
|Net income                      |  |              |   |                             |  |                   |  |       | 165,410  |   |  | 165,410  |  
|Share based
 compensation       |  |              |   |                             |  | 60                 |  |       |         |   |  | 60       |  
|Dividends
 ($0.60 per share)    |  |              |   |                             |  |                   |  |       | (32,706  | ) |  | (32,706  | )
|                                |  |              |    |                             |  |                    |  |       |          |   |  |          |  
|Balance as of December 31, 2009 |  |              | 55 |                             |  | 90                 |  |       | 97,074   |   |  | 97,219   |  
|                                |  |              |    |                             |  |                    |  |       |          |   |  |          |  

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

F-5

---



SAFE BULKERS, INC. COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS 
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009 
(In thousands of U.S. Dollars)

|                                                                                   |  |              |          |      |  |          |   |  |          |  
|---------------------------------------------------------------------------------- |  | ------------ | -------- | ---- |  | -------- | - |  | -------- | -
|                                                                                   |  | December 31, |         
|                                                                                   |  |              |         
|                                                                                   |  | 2007         |          | 2008 |  | 2009     |  
|                                                                                   |  |              |          |      |  |          |  
|                                                                                   |  |              |          |      |  |          |  
|Cash Flows from Operating Activities:                                              |  |              |          |      |  |          |   |  |          |  
|Net income                                                                         |  |              | 209,200  |      |  | 119,211  |   |  | 165,410  |  
|Adjustments to reconcile net income to net
 cash provided by operating activities: |  |              |          |      |  |          |   |  |          |  
|Depreciation                                                                       |  |              | 9,583    |      |  | 10,614   |   |  | 13,893   |  
|Gain on sale of assets                                                             |  |              | (112,360 | )    |  |         |   |  |         |  
|Loss on asset purchase cancellations                                               |  |              |         |      |  |         |   |  | 20,395   |  
|Amortization and write-off of deferred
 finance charges                            |  |              | 166      |      |  | 131      |   |  | 106      |  
|Unrealized foreign exchange loss / (gain)                                          |  |              | 13,877   |      |  | 9,335    |   |  | (1,028   | )
|Unrealized (gain)/loss of derivatives                                              |  |              | (335     | )    |  | 20,097   |   |  | (3,729   | )
|Share based compensation                                                           |  |              |         |      |  | 30       |   |  | 60       |  
|Amortization of time charter discount                                              |  |              | 2,766    |      |  | (2,766   | ) |  |         |  
|(Increase)/decrease in:                                                            |  |              |          |      |  |          |   |  |          |  
|Accounts receivable trade                                                          |  |              | (272     | )    |  | 1,189    |   |  | (1,377   | )
|Due from Manager                                                                   |  |              | 142,997  |      |  | 95,584   |   |  | 112      |  
|Inventories                                                                        |  |              | (159     | )    |  | (397     | ) |  | (56      | )
|Accrued revenue                                                                    |  |              |         |      |  | (3,938   | ) |  | 2,245    |  
|Prepaid expenses and other current assets                                          |  |              | 68       |      |  | (710     | ) |  | (408     | )
|Increase/(decrease) in:                                                            |  |              |          |      |  |          |   |  |          |  
|Due to Manager                                                                     |  |              |         |      |  |         |   |  | 19       |  
|Trade accounts payable                                                             |  |              | 151      |      |  | 373      |   |  | 1,093    |  
|Accrued liabilities                                                                |  |              | 9,984    |      |  | (5,245   | ) |  | 1,396    |  
|Unearned revenue                                                                   |  |              | 2,840    |      |  | 16,089   |   |  | 13,207   |  
|Net Cash Provided by Operating Activities                                          |  |              | 278,506  |      |  | 259,597  |   |  | 211,338  |  
|                                                                                   |  |              |          |      |  |          |   |  |          |  
|Cash Flows from Investing Activities:                                              |  |              |          |      |  |          |   |  |          |  
|Vessel acquisitions including advances for
 vessels under construction             |  |              | (127,875 | )    |  | (89,570  | ) |  | (131,474 | )
|Proceeds from sale of assets                                                       |  |              | 216,291  |      |  |         |   |  |         |  
|Acquisition of long term investments                                               |  |              |         |      |  |         |   |  | (50,000  | )
|Increase in restricted cash                                                        |  |              |         |      |  | (37,379  | ) |  | (6,405   | )
|Restricted cash released                                                           |  |              |         |      |  |         |   |  | 32,629   |  
|Increase in bank time deposits                                                     |  |              |         |      |  | (21,274  | ) |  | (78,147  | )
|Maturity of bank time deposits                                                     |  |              |         |      |  |         |   |  | 41,534   |  
|Net Cash Provided by/(Used in) Investing
 Activities                               |  |              | 88,416   |      |  | (148,223 | ) |  | (191,863 | )
|                                                                                   |  |              |          |      |  |          |   |  |          |  
|Cash Flows from Financing Activities:                                              |  |              |          |      |  |          |   |  |          |  
|Proceeds from long-term debt                                                       |  |              | 199,000  |      |  | 221,600  |   |  | 42,000   |  
|Principal payments of long-term debt                                               |  |              | (56,425  | )    |  | (85,532  | ) |  | (38,026  | )
|Advances from shareholders                                                         |  |              | 83,997   |      |  | 11,489   |   |  |         |  
|Repayment of advances to shareholders                                              |  |              | (209,355 | )    |  | (21,575  | ) |  |         |  
|Dividends paid                                                                     |  |              | (383,853 | )    |  | (209,239 | ) |  | (32,706  | )
|Payment of deferred financing costs                                                |  |              | (286     | )    |  | (470     | ) |  | (10      | )
|Proceeds on issuance of common stock                                               |  |              |         |      |  | 55       |   |  |         |  
|Net Cash Used in Financing Activities                                              |  |              | (366,922 | )    |  | (83,672  | ) |  | (28,742  | )
|                                                                                   |  |              |          |      |  |          |   |  |          |  
|Net increase/(decrease) in cash and cash
 equivalents                              |  |              |         |      |  | 27,702   |   |  | (9,267   | )
|Cash and cash equivalents at beginning of
 year                                    |  |              |         |      |  |         |   |  | 27,702   |  
|Cash and cash equivalents at end of year                                           |  |              |         |      |  | 27,702   |   |  | 18,435   |  
|Supplemental cash flow information:                                                |  |              |          |      |  |          |   |  |          |  
|Cash paid for interest (excluding
 capitalized interest):                          |  |              | 7,622    |      |  | 14,116   |   |  | 13,695   |  

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

F-6

---



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, 2009 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, 2009, these Subsidiaries owned and operated a fleet of 14 drybulk
vessels, and were scheduled to acquire an additional six 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
his family, 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 and dividend distribution of six 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 (1)
|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    
|Maxdodeka
 Shipping Corporation      |  | Andreas K           |  | PostPanamax |  | September
 2009   
|Maxpente
 Shipping Corporation       |  | TBN - H 1144        |  | Capesize     |  | 1H 2010 (2)       
|-//-                                 |  | Pedhoulas Farmer(3) |  | Kamsarmax    |  | January 2007      
|Maxdekatria
 Shipping Corporation    |  | TBN - H 1050        |  | PostPanamax |  | 1H 2010 (2)       
|Maxdeka
 Shipping Corporation        |  | TBN - H 1583        |  | PostPanamax |  | 2H 2010 (2)       
|Eptaprohi
 Shipping Corporation      |  | TBN - H 1074        |  | Capesize     |  | 2H 2011 (2)       
|Shikoku
 Friendship Shipping Company |  | TBN - H 1579        |  | PostPanamax |  | 2H 2011 (2)       
|Maxenteka
 Shipping Corporation      |  | TBN - H 1594        |  | PostPanamax |  | 1H 2012 (2)       
|Maxtessera
 Shipping Corporation     |  |                    |  |             |  |                  

| |     |                                                 
| | --- | ------------------------------------------------
| | (1) | Vessel sold
 in January 2010. Refer to Note 6.  
| |     |                                                 
| | (2) | Estimated
 completion date for newbuild vessels.
| |     |                                                 
| | (3) | Vessel sold
 in January 2007.                   

F-7

---



|                                 |  |                                         |  |           |  |       |  |                   
|-------------------------------- |  | --------------------------------------- |  | --------- |  | ----- |  | ------------------
|Additional Company               |  | Vessel Name                             |  | Type      |  | Built |  | Date Sold         
|                                 |  |                                         |  |           |  |       |  |                   
|Maripol
 Shipping Corporation    |  | Marina(hereinafter called Old Marina) |  | Panamax   |  | 2001  |  | June 8, 2005      
|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   

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) and a related party controlled by Polys
Hajioannou, provides technical, commercial and administrative management
services to the Company.

For the years
ended December 31, 2007, 2008 and 2009, the following charterers individually
accounted for more than 10% of the Companys charter revenues as follows:

|  |  |              |       |      |  |       |   |  |       |  
|- |  | ------------ | ----- | ---- |  | ----- | - |  | ----- | -
|  |  | December 31, |      
|  |  |              |      
|  |  | 2007         |       | 2008 |  | 2009  |  
|  |  |              |       |      |  |       |  
|A |  |              | 29.87 | %    |  | 25.62 | % |  |      |  
|B |  |              | 21.07 | %    |  |      |   |  |      |  
|C |  |              | 18.24 | %    |  | 36.09 | % |  | 56.59 | %
|D |  |              |      |      |  | 10.67 | % |  | 18.35 | %

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

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

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

F-8

---



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 Club (P&I Club) insurance in accordance with the
accounting guidance relating to 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 the vessels cost. Certain subsequent expenditures for conversions and
major improvements are also capitalized if it is determined that they
appreciably extend the life, increase the earning capacity or improve the
efficiency or safety of the vessels.

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

F-9

---



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 reviews its long-lived assets held and used for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. When the estimate of
undiscounted cash flows, excluding interest charges, expected to be generated
by the use of the asset is less than its carrying amount, the Company evaluates
the asset for an impairment loss. Measurement of the impairment loss is based
on the fair value of the asset. In this respect, management regularly reviews
the carrying amount of the vessels in connection with the estimated recoverable
amount for each of the Companys vessels. No impairment loss was recorded 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 when the following criteria are met: (i) management is
committed to sell the asset; (ii) the asset is available for immediate sale in
its present condition; (iii) an active program to locate a buyer and other
actions required to complete the plan to sell the asset have been initiated;
(iv) the sale of the asset is probable, and transfer of the asset is expected
to qualify for recognition as a completed sale within one year; (v) the asset
is being actively marketed for sale at a price that is reasonable in relation
to its current fair value; and (vi) actions required to complete the plan
indicate that it is unlikely that significant changes to the plan will be made
or that the plan will be withdrawn.

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

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

F-10

---



Derivative
Instruments: The Company enters into foreign
exchange forward contracts to create economic hedges for its exposure to
currency exchange risk on payments relating to the acquisition of vessels and
on certain loan obligations. The Company also enters into interest rate
derivatives to create economic hedges for its exposure to interest rate risk of
its loan obligations (see also Notes 9, 15 and 25 (b)). When such derivatives
do not qualify for hedge accounting the Company records these financial
instruments in the consolidated balance sheet at their fair value as either a
derivative asset or a liability, and recognizes the fair value changes thereto in
the 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, 2007, 2008 and 2009, 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, investments, 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 9.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (b) Concentration of credit risk: Financial instruments,
     which potentially subject the Company to significant concentrations of credit
     risk, consist principally of trade accounts receivable, cash and cash equivalents,
 time deposits and derivative instruments. The Company limits its credit risk
 with accounts receivable by performing ongoing credit evaluations of its
 customers financial condition and generally does not require collateral
 for its trade accounts receivable. The Company places its cash and cash
 equivalents, time deposits and other investments with high credit quality financial
 institutions. The Company performs periodic evaluations of the relative credit
 standing of those financial institutions. The Company is exposed to credit
 risk in the event of non-performance by its counterparties to derivative
 instruments; however, the Company limits its exposure by transacting with
 counterparties with high credit ratings.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (c) Fair value: 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 credit facilities and bank loans and investments 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 15, is based on a discounted cash flow
 analysis.                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | In
 accordance with the requirements of accounting guidance relating to Fair Value
 Measurement,the Company classifies and discloses assets and
 liabilities carried at fair value in one of the following three categories:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Level 1:
 Quoted market prices in active markets for identical assets or liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Level 2:
 Observable market-based inputs or unobservable inputs that are corroborated
 by market data.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Level 3:
 Unobservable inputs that are not corroborated by market data.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

F-11

---



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

Revenue is
recognized when a charter agreement exists, the vessel is made available to the
charterer and collection of the related revenue is reasonably assured. Unearned
revenue includes: (i) revenue received prior to the balance sheet date relating
to services to be rendered after the balance sheet date and (ii) deferred
revenue resulting from straight-line revenue recognition in respect of charter
agreements that provide for varying charter rates. Accrued Revenue results from
straight-line revenue recognition in respect of charter agreements that provide
for varying charter rates. Commissions (address and brokerage), regardless of
charter type, are always paid by the Company, are deferred and amortized over
the related charter period and are presented as a separate line item in
revenues to arrive at net revenues in the accompanying 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 the
Marshall Islands are not subject to Liberian or Marshall Islands income,
tonnage or registration taxes. However, each vessel-owning 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 period in which they are approved by the Companys Board of
Directors.

F-12

---



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 June 2009, the FASB
issued new guidance with regard to the consolidation of variable interest
entities (VIE). This guidance eliminates Interpretation 46(R)s exceptions to
consolidating qualifying special-purpose entities, contains new criteria for
determining the primary beneficiary, and increases the frequency of required
reassessments to determine whether a company is the primary beneficiary of a
variable interest entity. This guidance also contains a new requirement that
any term, transaction or arrangement that does not have a substantive effect on
an entitys status as a variable interest entity, a companys power over a
variable interest entity, or a companys obligation to absorb losses or its
right to receive benefits of an entity must be disregarded in applying
Interpretation 46(R)s provisions. The elimination of the qualifying
special-purpose entity concept and its consolidation exceptions means more
entities will be subject to consolidation assessments and reassessments. This
new guidance is effective from January 1, 2010. The adoption of this
pronouncement is not expected to have a material impact on the Companys
consolidated financial position and results of operations.

3. Transactions with Related Parties

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

For the year
ended December 31, 2007, each of the Subsidiaries and Additional Companies that
had a vessel in operation had in place a management agreement with the Manager
(the Old Management Agreements). Under such agreements, chartering,
operations, technical and accounting services were provided with respect to the
vessels by the Manager. Under the Old Management Agreements, the Manager
received a fixed 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, 2007, 2008 and 2009 amounted to $1,177, $4,420 and $4,436
respectively, and are recorded in the accompanying combined and consolidated
statements of income as General and Administrative Expenses (see Note 20).
Commissions on the contract price of vessels sold, charged by the Manager
during the years ended December 31, 2007, 2008 and 2009, amounted to $2,202, $0
and $0 respectively, and are recorded within Gain on sale of assets in the
combined and consolidated statements of income (see Note 22). Commissions on
the contract price of vessels purchased, charged by the Manager during the
years ended December 31, 2007, 2008 and 2009, amounted to $0, $0 and $710
respectively, and are included as part of the vessel cost. Supervision fees,
charged by the Manager during the years ended December 31, 2007, 2008 and 2009,
amounted to $0, $750 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,
2008 and 2009, the amounts Due from Manager and Due to Manager,
presented respectively in the consolidated balance sheet, represent amounts due
from the Manager and due to the Manager in relation to the operating expenses
of the vessels.

F-13

---



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

Transactions with
other related parties: Kanastro Shipping
Corporation, one of the Additional Companies, sold its respective vessel on
February 2, 2007 to an unrelated third party for an amount of $47,300, being
the prevailing market price, realizing an aggregate profit of $26,925. The gain
on sale of asset was recorded in the accompanying combined and consolidated
statements of income in the period in which the sale was consummated. Following
completion of the sale, the vessel was chartered for a period of 38 months by
SafeFixing Corp. (SafeFixing), a former related party which was wholly-owned
at the time by Polys Hajioannou and Nicolaos Hadjioannou, which 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 not to accept the opportunity to
purchase SafeFixing that was offered by its owners. The charter entered into by
SafeFixing was consistent with the then prevailing charter market rate. Refer
to Note 22 for further information related to the other components of the total
Gain on sale of assets balance.

4. Vessels, Net

Vessels, net,
are comprised of the following:

|                                                |  |              |         |                           |   |                 |   |   |         |  
|----------------------------------------------- |  | ------------ | ------- | ------------------------- | - | --------------- | - | - | ------- | -
|                                                |  | Vessel
 Cost |         | Accumulated
 Depreciation |   | Net Book
 Value |  
|                                                |  |              |         |                           |   |                 |  
|Balance, January 1, 2008                        |  | $            | 280,100 |                           | $ | (25,283         | ) | $ | 254,817 |  
|Transfer from Advances for vessel
 acquisitions |  |              | 42,648  |                           |   |                |   |   | 42,648  |  
|Depreciation expense                            |  |              |        |                           |   | (10,510         | ) |   | (10,510 | )
|                                                |  |              |         |                           |   |                 |   |   |         |  
|Balance, December 31, 2008                      |  |              | 322,748 |                           |   | (35,793         | ) |   | 286,955 |  
|                                                |  |              |         |                           |   |                 |   |   |         |  
|Transfer from Advances for vessel
 acquisitions |  |              | 117,753 |                           |   |                |   |   | 117,753 |  
|Transfer to Assets held for sale                |  |              | (22,058 | )                         |   | 5,089           |   |   | (16,969 | )
|Depreciation expense                            |  |              |        |                           |   | (13,815         | ) |   | (13,815 | )
|                                                |  |              |         |                           |   |                 |   |   |         |  
|Balance, December 31, 2009                      |  | $            | 418,443 |                           | $ | (44,519         | ) | $ | 373,924 |  
|                                                |  |              |         |                           |   |                 |   |   |         |  

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

| |   |                                                                  
| | - | -----------------------------------------------------------------
| |  | During the
 year ended December 31, 2008: Eleni;
 and            
| |   |                                                                  
| |  | During the
 year ended December 31, 2009: Martine and Andreas
 K.

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

As of December
31, 2009, all of the Companys vessels except for the Andreas K have been provided
as collateral to secure the Companys bank loans as discussed in Note 9.

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, 2008                                    |  | $ | 53,272   |  
|Advances paid, including capitalized
 expenses and interest |  |   | 89,570   |  
|Transferred to vessel cost                                  |  |   | (42,648  | )
|                                                            |  |   |          |  
|Balance, December 31, 2008                                  |  |   | 100,194  |  
|                                                            |  |   |          |  
|Advances paid, including capitalized
 expenses and interest |  |   | 131,474  |  
|Asset cancellations                                         |  |   | (20,395  | )
|Transferred to vessel cost                                  |  |   | (117,753 | )
|                                                            |  |   |          |  
|Balance, December 31, 2009                                  |  | $ | 93,520   |  
|                                                            |  |   |          |  

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

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

F-14

---



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

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

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

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

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

| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | During the
 year ended December 31, 2008: Eleni
 and Martine,
 and Hull
 1074, Hull 1075 and Hull 1579.                         
| |   |                                                                                                                                 
| |  | During the
 year ended December 31, 2009: Martine and Andreas K, and Hull 1074,
 Hull
 1144, Hull 1579, Hull 1583 and Hull 1594.

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

| |   |                                                                  
| | - | -----------------------------------------------------------------
| |  | During the
 year ended December 31, 2008: Eleni.                 
| |   |                                                                  
| |  | During the
 year ended December 31, 2009: Martine and Andreas
 K.

6. Asset Held for Sale

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

7. Other Fixed Assets, Net

Other fixed
assets represent minor movable equipment on board the vessels, which were
capitalized up to December 31, 2007, and which are depreciated on a
straight-line basis over five years. Depreciation charges for the years ended
December 31, 2008 and 2009 amounted to $104 and $78, respectively. Acquisitions
of minor movable equipment on board the vessels subsequent to December 31, 2007
are expensed in the year incurred, due to the immaterial amounts involved.

8. Deferred Finance Charges, Net

Deferred
finance charges are comprised of the following:

|                                     |  |   |      |  
|------------------------------------ |  | - | ---- | -
|Balance, January 1, 2008             |  | $ | 434  |  
|Additions                            |  |   | 470  |  
|Write-off due to debt extinguishment |  |   | (38  | )
|Amortization expense                 |  |   | (93  | )
|                                     |  |   |      |  
|Balance, December 31, 2008           |  |   | 773  |  
|                                     |  |   |      |  
|Additions                            |  |   | 10   |  
|Amortization expense                 |  |   | (106 | )
|                                     |  |   |      |  
|Balance, December 31, 2009           |  | $ | 677  |  
|                                     |  |   |      |  

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.

F-15

---



9. Bank Debt

Bank debt is
comprised of the following secured borrowings:

|                                                        |  |              |         |      |   |         | 
|------------------------------------------------------- |  | ------------ | ------- | ---- | - | ------- | 
|                                                        |  | December 31, |        
|                                                        |  |              |        
|Borrower                                                |  | 2008         |         | 2009 |  
|                                                        |  |              |         |      |  
|Marathassa                                              |  | $            | 22,526  |      | $ | 19,825  | 
|Marinouki                                               |  |              | 32,075  |      |   | 30,763  | 
|Petra                                                   |  |              | 37,071  |      |   | 34,871  | 
|Pemer                                                   |  |              | 37,068  |      |   | 34,867  | 
|Pelea                                                   |  |              | 38,750  |      |   | 38,750  | 
|Soffive                                                 |  |              | 43,200  |      |   | 41,400  | 
|Kerasies                                                |  |              | 38,400  |      |   | 36,800  | 
|Efragel                                                 |  |              | 41,250  |      |   | 34,500  | 
|Marindou                                                |  |              | 41,250  |      |   | 34,500  | 
|Avstes                                                  |  |              | 35,100  |      |   | 30,000  | 
|Staloudi                                                |  |              | 56,600  |      |   | 52,960  | 
|Eniaprohi                                               |  |              | 45,000  |      |   | 40,000  | 
|Eniadefhi                                               |  |              |        |      |   | 42,000  | 
|                                                        |  |              |         |      |   |         | 
|Total                                                   |  | $            | 468,290 |      | $ | 471,236 | 
|                                                        |  |              |         |      |   |         | 
|                                                        |  |              |         |      |   |         | 
|Liability directly associated with asset
 held for sale |  |              |        |      |   | 34,500  | 
|Current portion                                         |  | $            | 54,807  |      | $ | 15,742  | 
|                                                        |  |              |         |      |   |         | 
|Long-term portion                                       |  | $            | 413,483 |      | $ | 420,994 | 
|                                                        |  |              |         |      |   |         | 

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 semiannual installments and a balloon
payment at maturity in February 2017. 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, Canadian dollar (CAD) or pound sterling
(GBP). This election has been exercised. In February 2009, Marathassa
converted the outstanding portion of the loan denominated in CHF into USD. The
average interest rate (including the margin) during the years 2008 and 2009 was
3.802% p.a. and 2.211% p.a., respectively.

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 semiannual installments and a balloon payment
in March 2018. 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 2008 and 2009 was
3.104% p.a. and 2.853% p.a., respectively.

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 semiannual installments and
a balloon payment at maturity in January 2019. 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 canceled. 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, 2008 and 2009 was 3.790% p.a. and 1.896%,
respectively.

F-16

---



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
semiannual installments and a balloon payment at maturity in March 2019. 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 canceled. 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, 2008
and 2009 was 3.279% p.a. and 1.917% p.a., respectively.

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 semiannual payments and
a balloon payment at maturity in June 2019. The ability to drawdown on the credit
facility is reduced with each semiannual 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. During 2008,
Pelea effected aggregate prepayments of USD 1,300 against the outstandings of
the Pelea credit facility. Following these prepayments, the outstanding balance
as of December 31, 2009 was payable in 18 semiannual installments from
December 2010 to June 2019, plus a balloon payment payable in June 2019. The
average interest rate (including the margin) during the years ended December
31, 2008 and 2009 was 4.555% p.a. and 1.870% p.a., respectively. As of December
31, 2009, the outstanding balance of the Pelea credit facility amounted to
$38,750.

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 semiannual
installments and a balloon payment at maturity in November 2019. 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, 2008 and 2009 was 4.303% p.a. and 2.509% p.a., respectively.

Kerasies Loan:
In December 2007, Kerasies Shipping Corporation (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 semiannual installments and a balloon payment at maturity in
December 2019. 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, 2008 and 2009 was 4.075% p.a. and
2.419% p.a., respectively.

Efragel Loan:
In January 2008, Efragel Shipping Corporation (Efragel) obtained a reducing
revolving credit facility in the amount of $42,000, which was drawn to repay in
full an existing credit facility, 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 semiannual payments and a balloon payment at maturity in January 2018. The
ability to drawdown on the credit facility is reduced with each semiannual
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. During 2009, Efragel effected aggregate prepayments of USD 6,000
against the outstandings of the Efragel credit facility. Following these
prepayments, the outstanding balance as of December 31, 2009 was payable in 14
semiannual installments from July 2011 to January 2018, plus a balloon payment
payable in January 2018. The average interest rate (including the margin) during
the years ended December 31, 2008 and 2009 was 4.159% p.a. and 1.712% p.a.,
respectively. On June 9, 2009, Efragel entered into a MoA with a third party,
pursuant to which the vesselEfrossiniwould be sold to the third
party, hence the balance of the Efragel credit facility as of December 31, 2009
has been recorded in the consolidated balance sheet as Liability directly
associated with asset held for sale. The vessel was sold on January 7, 2010,
and the Efragel credit facility was concurrently fully prepaid.

F-17

---



Marindou Loan:
In January 2008, Marindou Shipping Corporation (Marindou) obtained a reducing
revolving credit facility in the amount of $42,000, which was drawn to repay in
full an existing 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 semiannual payments and a balloon payment at maturity in January 2018.
The ability to drawdown on the credit facility is reduced with each semiannual
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. During 2009, Marindou effected aggregate prepayments of USD 6,000
against the outstandings of the Marindou credit facility. Following these
prepayments, the outstanding balance of as of December 31, 2009 was repayable
in 14 semiannual installments from July 2011 to January 2018, plus a balloon
payment payable in January 2018. The average interest rate (including the
margin) during the years ended December 31, 2008 and 2009 was 4.346% p.a. and
1.737% p.a., respectively.

Avstes Loan:
In April 2008, Avstes Shipping Corporation (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 semiannual payments and a
balloon payment at maturity in April 2018. The ability to drawdown on the credit
facility is reduced with each semiannual 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. During 2009,
Avstes effected aggregate prepayments of USD 5,100 against the outstandings of
the Avstes credit facility. Following these prepayments, the outstanding
balance of as of December 31, 2009 was repayable in 15 semiannual installments
from April 2011 to April 2018, plus a balloon payment payable in April 2018.
The average interest rate (including the margin) during the years ended
December 31, 2008 and 2009 was 4.154% p.a. and 2.627% p.a., respectively.

Staloudi 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). In July 2008, Staloudi obtained a bank loan for up
to $56,600 (the Staloudi loan), which was drawn to repay in full an existing
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
semiannual installments and a balloon payment at maturity in July 2023. 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 years ended December 31, 2008 and 2009 was 3.558% p.a. and
2.035% p.a., respectively.

Eniaprohi Loan: In November 2008,
Eniaprohi Shipping Corporation (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 20 semiannual payments and a balloon payment at
maturity in November 2018. The ability to drawdown on the credit facility is
reduced with each semiannual 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. During 2008, Eniaprohi effected
aggregate prepayments of USD 5,000 against the outstanding Eniaprohi credit
facility. Following these prepayments, the outstanding balance as of
December 31, 2009 was payable in 16 semiannual installments from May 2011 to
November 2018 plus a balloon payment payable in November 2018. The average
interest rate (including the margin) during the years ended December 31, 2008
and 2009 was 3.445% p.a. and 2.257% p.a., respectively.

Eniadefhi Loan:
In February 2009, Eniadefhi Shipping Corporation (Eniadefhi) obtained a
reducing revolving credit facility in the amount of up to $45,000, to be used
to finance the purchase price of the vessel Martineand increase the Companys cash reserves (the Eniadefhi credit
facility). During 2009, Eniadefhi made aggregate drawings of $42,000 from the
Eniadefhi credit facility. The Eniadefhi credit facility bears interest at
LIBOR plus a margin and is repayable over 10 years in 20 semiannual payments
and a balloon payment at maturity in February 2019. The ability to drawdown on
the credit facility is reduced with each semiannual 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,
2009 was 1.690% p.a. As of December 31, 2009, the outstanding balance of the
Eniadefhi credit facility amounted to $42,000 and was payable in 18 semiannual
installments from August 2010 to February 2019, plus a balloon payment payable
in February 2019.

As of December
31, 2009, an amount of $1,875 was available for drawing under the Eniadefhi
credit facility. No further amount was available for drawing in any of the
above other 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.

F-18

---



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

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

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

As 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.

The foregoing
loans and credit facilities are secured as follows:

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

The loan and
credit facility agreements 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 and credit facilities, 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 either to make a loan prepayment or to provide cash
collateral security in an amount necessary for the outstanding to comply with
the above calculation.

In six of the
loan and credit facility agreements, the respective borrower must maintain at
all times a minimum balance of $150 in the vessel operating account. In one of
the loan and credit facility agreements the borrower must maintain a cash
collateral deposit of $2,000 with the lender. In addition, the corporate
guarantees 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; and                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                         
| |  | a minimum of
 51% of its shares shall remain directly or indirectly beneficially owned by the
 Hajioannou family for the duration of the relevant credit facilities.                                                                                                                                                                    

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

F-19

---



Pursuant to
the supplemental agreements relating to the Marathassa, Marinouki, Kerasies and
Soffive loans dated April 6, 2009, the basis of calculation of the Minimum
Value Covenant was amended, as 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. 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, the
Consolidated Net Worth Covenant and the 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, the Consolidated Net Worth Covenant and the
EBITDA Covenant. Under these supplemental agreements the respective borrowers
undertook to prepay on the next interest payment date relating to each of the
relevant credit facilities an amount sufficient to restore compliance with the
Minimum Value Covenant for each facility. The prepayments for these credit
facilities totaled $22,100 within the year ended December 31, 2009 and were
applied in order of maturity for the three principal payments following the
next rollover date and applied pro rata thereafter. In addition, in the event
that during the 12-month waiver period ending March 31, 2010, any charter
agreement of the Company is canceled, any of its terms are waived or the
charter rates under such charter agreement decrease, in order to continue
paying dividends, the Company must demonstrate to the lender at the time of issuing
its quarterly results that it has the necessary cash resources to meet its
future newbuild commitments, assuming additional debt of $15,000 per newbuild,
while at all times maintaining a minimum cash balance of $25,000. Under these
supplemental agreements, compliance with the covenants with respect to
guarantees provided by the Company in relation to the Efragel, Avstes,
Marindou, Pelea, Eniadefhi and Eniaprohi credit facilities was waived until
March 31, 2010, inclusive.

As of December
31, 2009, the Company was in compliance with all debt covenants with respect
to its loans and credit facilities. If the waivers in relation to the
guarantees provided by the Company with respect to the Efragel, Avstes,
Marindou, Pelea and Eniadefhi credit facilities had not been in place as of
December 31, 2009, the Company would still have been in compliance with
all debt covenants as of that date.

The estimated
minimum annual principal payments required to be made after December 31, 2009,
based on the bank loan and credit facility agreements and supplemental
agreements, are as follows:

|                     |  |                  | 
|-------------------- |  | ---------------- | 
|To December 31,      |  |                  | 
|                     |  |                  | 
|                     |  |                  | 
|2010                 |  | $         50,242 | 
|2011                 |  | 24,374           | 
|2012                 |  | 25,404           | 
|2013                 |  | 25,961           | 
|2014                 |  | 27,041           | 
|2015 and
 thereafter |  | 318,214          | 
|                     |  |                  | 
|Total                |  | $     471,236    | 
|                     |  |                  | 

Total interest
incurred on long-term debt for the years ended December 31, 2007, 2008 and 2009
amounted to $8,225, $16,696 and $10,400, respectively, which includes interest
capitalized of $304 and $58 for the years ended December 31, 2008 and 2009. No
interest was capitalized for the year ended December 31, 2007. The average
interest rate (including the margin) for all bank loan and credit facilities
during the years 2007, 2008 and 2009 was 3.353% p.a., 4.030% p.a. and 2.137%
p.a., respectively.

F-20

---



10. Long-term
Investment

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

11. Share Capital

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

According to
an arrangement approved by the Companys corporate governance, nominating and
compensation committee effective July 1, 2008, the audit committee chairman
receives the equivalent of $15 every quarter, payable in arrears in the form of
newly issued common stock of the Company as compensation for services rendered
as audit committee chairman. The number of shares to be issued is determined
based on the closing price of the Companys common stock on the last trading
day prior to the end of each quarter in which services were provided and are issued
as soon as practicable following the end of the quarter. During the years ended
December 31, 2008 and 2009, 1,334 shares and 11,597 shares, respectively, were
issued to the audit committee chairman.

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

12. Commitments and Contingencies

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

As of December
31, 2009, the Company had commitments under one shipbuilding contract and five
MoAs for the acquisition of six newbuilds. The Company expects to settle these
commitments as follows:

|                        |  |                            |              |                |  |       |            |  |  |              | 
|----------------------- |  | -------------------------- | ------------ | -------------- |  | ----- | ---------- |  |  | ------------ | 
|Year Ending December 31 |  | Due to Shipyards / Sellers |              | Due to Manager |  | Total |           
|                        |  |                            |              |                |  |       |            |  |  |              | 
|2010                    |  |                            | $    176,070 |                |  |       | $    2,590 |  |  | $    178,660 | 
|2011                    |  |                            | 74,520       |                |  |       | 2,298      |  |  | 76,818       | 
|2012                    |  |                            | 24,000       |                |  |       | 667        |  |  | 24,667       | 
|                        |  |                            |              |                |  |       |            |  |  |              | 
|Total                   |  |                            | $  274,590   |                |  |       | $  5,555   |  |  | $  280,145   | 
|                        |  |                            |              |                |  |       |            |  |  |              | 

|    |                             
|--- | ----------------------------
|    |                             
|(b) | Other contingent liabilities

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

13. Revenues

Revenues are
comprised of the following:

|                      |  |              |         |      |   |         |  |   |         | 
|--------------------- |  | ------------ | ------- | ---- | - | ------- |  | - | ------- | 
|                      |  | December 31, |        
|                      |  |              |        
|                      |  | 2007         |         | 2008 |   | 2009    | 
|                      |  |              |         |      |   |         | 
|Time charter
 revenue |  | $            | 165,657 |      | $ | 202,588 |  | $ | 165,604 | 
|Ballast
 bonus        |  |              | 535     |      |   | 2,765   |  |   | 980     | 
|Other income          |  |              | 5,865   |      |   | 3,058   |  |   | 1,816   | 
|                      |  |              |         |      |   |         |  |   |         | 
|Total                 |  | $            | 172,057 |      | $ | 208,411 |  | $ | 168,400 | 
|                      |  |              |         |      |   |         |  |   |         | 

F-21

---



14. Vessel Operating Expenses

Vessel
operating expenses are comprised of the following:

|                                           |  |              |        |      |   |        |  |   |        | 
|------------------------------------------ |  | ------------ | ------ | ---- | - | ------ |  | - | ------ | 
|                                           |  | December 31, |       
|                                           |  |              |       
|                                           |  | 2007         |        | 2008 |   | 2009   | 
|                                           |  |              |        |      |   |        | 
|Crew wages and
 related costs              |  | $            | 6,784  |      | $ | 8,215  |  | $ | 10,055 | 
|Insurance                                  |  |              | 1,388  |      |   | 2,138  |  |   | 2,112  | 
|Repairs,
 maintenance and drydocking costs |  |              | 324    |      |   | 2,211  |  |   | 994    | 
|Spares,
 stores and provisions             |  |              | 1,673  |      |   | 2,372  |  |   | 2,845  | 
|Lubricants                                 |  |              | 1,457  |      |   | 1,916  |  |   | 2,451  | 
|Taxes                                      |  |              | 247    |      |   | 116    |  |   | 140    | 
|Miscellaneous                              |  |              | 556    |      |   | 647    |  |   | 1,031  | 
|                                           |  |              |        |      |   |        |  |   |        | 
|Total                                      |  | $            | 12,429 |      | $ | 17,615 |  | $ | 19,628 | 
|                                           |  |              |        |      |   |        |  |   |        | 

15. Fair Value of Financial Instruments /
Derivatives 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 note and variable interest rate debt (loan and credit facilities)
approximates the carrying value, due to their variable interest rates.

Derivative instruments

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

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

Derivatives not designated as hedging instruments

|                          |  |                                                    |  |                                |       |                                    |   |                     |  |                     |        |  |   |        | 
|------------------------- |  | -------------------------------------------------- |  | ------------------------------ | ----- | ---------------------------------- | - | ------------------- |  | ------------------- | ------ |  | - | ------ | 
|                          |  |                                                    |  | Asset Derivatives
 Fair Values |       | Liability Derivatives
 Fair Values |  
|                          |  |                                                    |  |                                |       |                                    |  
|Type of Contract          |  | Balance sheet location                             |  | December 31,
 2008             |       | December 31, 
 2009                |   | December 31, 
 2008 |  | December 31, 
 2009 |       
|                          |  |                                                    |  |                                |       |                                    |   |                     |  |                     |       
|Interest
 Rate            |  | Derivative
 assets/ Current assets                 |  |                                |      |                                    | $ | 123                 |  |                     |       |  |   |       | 
|                          |  |                                                    |  |                                |       |                                    |   |                     |  |                     |        |  |   |        | 
|Foreign
 Exchange Forward |  | Derivative
 assets / Other non-current assets      |  | $                              | 1,377 |                                    |   |                    |  |                     |       |  |   |       | 
|                          |  |                                                    |  |                                |       |                                    |   |                     |  |                     |        |  |   |        | 
|Interest
 Rate            |  | Derivative
 liabilities / Current liabilities      |  |                                |      |                                    |   |                    |  |                     |       |  | $ | 1,223  | 
|                          |  |                                                    |  |                                |       |                                    |   |                     |  |                     |        |  |   |        | 
|Interest
 Rate            |  | Derivative
 liabilities / Non-current
 liabilities |  |                                |      |                                    |   |                    |  | $                   | 21,578 |  | $ | 15,510 | 
|                          |  |                                                    |  |                                |       |                                    |   |                     |  |                     |        |  |   |        | 
|Foreign
 Exchange Forward |  | Derivative
 liabilities / Non-current
 liabilities |  |                                |      |                                    |   |                    |  |                     | 138    |  |   |       | 
|                          |  |                                                    |  |                                |       |                                    |   |                     |  |                     |        |  |   |        | 
|                          |  | Total
 Derivatives                                 |  | $                              | 1,377 |                                    | $ | 123                 |  | $                   | 21,716 |  | $ | 16,733 | 
|                          |  |                                                    |  |                                |       |                                    |   |                     |  |                     |        |  |   |        | 

|                                    |  |                                                   |         |      |   |        |  
|----------------------------------- |  | ------------------------------------------------- | ------- | ---- | - | ------ | -
|                                    |  | Amount of Gain / (Loss) Recognized on Derivatives |        
|                                    |  |                                                   |        
|                                    |  | Year ended December 31,                           |        
|                                    |  |                                                   |        
|                                    |  | 2008                                              |         | 2009 |  
|                                    |  |                                                   |         |      |  
|Foreign Exchange Forward
 Contracts |  | $                                                 | 2,463   |      | $ | (931   | )
|Interest Rate Contracts             |  |                                                   | (21,972 | )    |   | (3,485 | )
|                                    |  |                                                   |         |      |   |        |  
|                                   
|Net (Loss) Recognized               |  | $                                                 | (19,509 | )    | $ | (4,416 | )
|                                    |  |                                                   |         |      |   |        |  

F-22

---



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

The Companys
interest rate derivative instruments are pay-fixed, receive-variable interest
rate swaps based on the USD LIBOR swap rate. The fair value of the interest
rate swaps is determined using a discounted cash flow approach based on
market-based LIBOR swap yield curves. LIBOR swap rates are observable at
commonly quoted intervals for the full terms of the swaps and therefore are
considered Level 2 items in accordance with the fair value hierarchy. The
following table summarizes the valuation of the Companys financial instruments as of
December 31, 2008 and 2009.

|                                             |  |                                                 |          |  |  |           | 
|-------------------------------------------- |  | ----------------------------------------------- | -------- |  |  | --------- | 
|                                             |  | Significant
 Other Observable Inputs
 (Level 2) |         
|                                             |  |                                                 |         
|                                             |  | December 31,                                    |         
|                                             |  |                                                 | 2008     |  |  | 2009      | 
|Derivative
 instruments  asset position     |  |                                                 | $  1,377 |  |  | $     123 | 
|Derivative
 instruments  liability position |  |                                                 | 21,716   |  |  | 16,733    | 

As of December
31, 2008 and 2009, no fair value measurements for assets or liabilities under
Level 1 or Level 3 were recognized in the Companys consolidated balance sheet.

Interest
Rate Derivatives

Details of
interest rate swap transactions entered into with certain banks in respect of
certain loans and credit facilities are presented in the table below:

|                         |  |                    |  |                    |  |            |  |                    |  |                    | 
|------------------------ |  | ------------------ |  | ------------------ |  | ---------- |  | ------------------ |  | ------------------ | 
|                         |  |                    |  |                    |  |            |  | Notional amount    | 
|                         |  |                    |  |                    |  |            |  |                    | 
|Loan or Credit
 Facility |  | Inception          |  | Expiry             |  | Swap
 Rate |  | December 31,
 2008 |  | December 31,
 2009 | 
|                         |  |                    |  |                    |  |            |  |                    |  |                    | 
|Kerasies                 |  | December 14,
 2007 |  | December 14,
 2010 |  | 4.0925%    |  | $     38,400       |  | $     36,800       | 
|Marindou                 |  | January 14,
 2008  |  | January 14,
 2013  |  | 3.9500%    |  | 41,250             |  | 28,000             | 
|Efragel                  |  | January 17,
 2008  |  | January 17,
 2013  |  | 3.6500%    |  | 41,250             |  | 28,000             | 
|Petra                    |  | February 19,
 2008 |  | January 18,
 2013  |  | 2.8850%    |  | 37,071             |  | 34,871             | 
|Pemer                    |  | March 7,
 2008     |  | March 7,
 2013     |  | 2.7450%    |  | 37,068             |  | 34,868             | 
|Marinouki                |  | March 19,
 2008    |  | March 5,
 2013     |  | 2.7300%    |  | 32,075             |  | 30,763             | 
|Avstes                   |  | April 25,
 2008    |  | April 18,
 2013    |  | 3.8900%    |  | 35,100             |  | 29,000             | 
|Pelea                    |  | December 15,
 2008 |  | December 15,
 2011 |  | 3.7000%    |  | 40,050             |  | 36,000             | 
|Soffive                  |  | November 20,
 2008 |  | November 20,
 2011 |  | 3.5500%    |  | 43,200             |  | 41,400             | 
|Eniaprohi                |  | November 13,
 2008 |  | November 14,
 2011 |  | 3.1500%    |  | 45,000             |  | 40,000             | 
|Staloudi                 |  | January 7,
 2009   |  | January 7,
 2012   |  | 3.3850%    |  | 54,780             |  | 52,960             | 
|Eniadefhi                |  | April 1,
 2009     |  | February 12,
 2014 |  | 3.3500%    |  |                   |  | 40,000             | 
|Marathassa               |  | November 23,
 2009 |  | November 23,
 2012 |  | 1.6500%    |  |                   |  | 19,825             | 
|                         |  |                    |  |                    |  |            |  |                    |  |                    | 
|Total                    |  |                    |  |                    |  |            |  | $  445,244         |  | $  452,487         | 
|                         |  |                    |  |                    |  |            |  |                    |  |                    | 

The notional
amounts of the above transactions are reduced during the term of the swap
transactions based on the expected principal outstanding under the respective
facility. In the Petra, Pemer and Marinouki transactions, the respective bank
has the right to cancel each swap on January 18, 2011, March 7, 2011 and March
5, 2011, respectively, and at six-month intervals thereafter.

Under all of
the swap transactions described above except for Kerasies and Marathassa, the
bank effects semiannual floating-rate payments to the Company for the relevant
amount based on the six-month U.S. dollar LIBOR, and the Company effects
semiannual payments to the bank on the relevant amount at the respective fixed
rates. For Kerasies and Marathassa, the bank effects quarterly floating-rate
payments to the Company for the relevant amount based on the three-month U.S.
dollar LIBOR, and the Company effects quarterly payments to the bank on the
relevant amount at the respective fixed rates.

Foreign
Exchange Derivatives

The contract
or notional amounts of the foreign exchange forward contracts as of December
31, 2008 amounted to $65,978 or JPY 5.0 billion and CHF 12.7 million. Forward
currency contracts are observable at commonly quoted intervals for the full
term of the swaps and are therefore considered a Level 2 item, and the fair
values are reflected in the table above. The fair values of the foreign
exchange forward contracts are determined using a discounted cash flow approach
based on market interest and foreign exchange rates. The Company did not have
foreign exchange forward contracts as of December 31, 2009.

F-23

---



16. Accrued Liabilities

Accrued liabilities are comprised of the following:

|                                                    |  |              |       |      |   |       | 
|--------------------------------------------------- |  | ------------ | ----- | ---- | - | ----- | 
|                                                    |  | December 31, |      
|                                                    |  |              |      
|                                                    |  | 2008         |       | 2009 |  
|                                                    |  |              |       |      |  
|Interest on
 long-term debt                         |  | $            | 4,299 |      | $ | 1,005 | 
|Vessels
 operating and voyage expenses             |  |              | 695   |      |   | 1,303 | 
|Commissions                                         |  |              | 230   |      |   | 1,311 | 
|Interest on derivatives
 and other finance expenses |  |              | 303   |      |   | 3,136 | 
|General and
 administrative expenses                |  |              | 503   |      |   | 671   | 
|                                                    |  |              |       |      |   |       | 
|Total                                               |  | $            | 6,030 |      | $ | 7,426 | 
|                                                    |  |              |       |      |   |       | 

17. Early Redelivery (Cost) / Income

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

|                                |     |                     |  |              |   |          |   |           | 
|------------------------------- | --- | ------------------- |  | ------------ | - | -------- | - | --------- | 
|                                |     |                     |  | December 31, |  
|                                |     |                     |  |              |  
|Company                         |     | Date                |  | 2007         |   | 2008     |   | 2009      | 
|                                |     |                     |  |              |   |          |   |           | 
|Staloudi                        | (a) | March 9,
 2007      |  | $  (14,382   | ) |         |   |          | 
|Marinouki                       | (b) | October 17,
 2007   |  | (5,467       | ) | $    215 |   |          | 
|Kerasies                        | (c) | September
 20, 2007 |  | (1,089       | ) |         |   |          | 
|Petra                           | (d) | March 7,
 2008      |  |             |   | (780     | ) |          | 
|Efragel                         | (e) | March 15,
 2009     |  |             |   |         |   | $  29,096 | 
|Kerasies                        | (f) | June 26,
 2009      |  |             |   |         |   | 22,331    | 
|Marindou                        | (g) | June 28,
 2009      |  |             |   |         |   | 20,046    | 
|Pelea                           | (h) | July 19,
 2009      |  |             |   |         |   | 2,653     | 
|Other minor
 early redeliveries |     | Various             |  | (500         | ) |         |   | 825       | 
|                                |     |                     |  |              |   |          |   |           | 
|                                |     |                     |  |              |   |          |   |           | 
|Total                           |     |                     |  | $ (21,438    | ) | $ (565   | ) | $ 74,951  | 
|                                |     |                     |  |              |   |          |   |           | 

Details of the
transactions presented 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: (i) cash payment to the charterer of $3,375 upon
termination of the time charter and redelivery of the vessel and (ii)
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.

F-24

---



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 was recorded as a long-term liability and
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.

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

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

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

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

(i) On
December 17, 2009, Pemer agreed with the charterer of the Pedhoulas Merchantto
terminate the existing charter during February or March 2010, instead of on November
5, 2010. In exchange for the early redelivery of this vessel, the charterer agreed
to pay cash compensation ranging from $5,122 to $5,829, net of commissions, depending
on the vessels actual redelivery date. The early redelivery income arising
out of this arrangement will be recorded on redelivery of the vessel in 2010.

18. Loss on Asset Purchase Cancellations

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

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

F-25

---



19. Lease ArrangementsCharters-out

The future
minimum time charter revenue, net of commissions, based on vessels committed
    to non-cancelable time charter contracts (including fixture recaps) with
    an initial or remaining charter period in excess of one year as of December
    31, 2009, is as follows:

|             |  |  |   |         | 
|------------ |  |  | - | ------- | 
|December 31, |  |  |   |         | 
|             |  |  |   |         | 
|2010         |  |  | $ | 128,055 | 
|2011         |  |  |   | 105,752 | 
|2012         |  |  |   | 91,298  | 
|2013         |  |  |   | 75,191  | 
|2014         |  |  |   | 33,755  | 
|Thereafter   |  |  |   | 5,463   | 
|             |  |  |   |         | 
|Total        |  |  | $ | 439,514 | 
|             |  |  |   |         | 

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

20. General and Administrative Expenses

General and
administrative expenses for the years ended December 31, 2007, 2008 and 2009
were as follows:

|                                          |  |              |       |      |   |       |  |   |       | 
|----------------------------------------- |  | ------------ | ----- | ---- | - | ----- |  | - | ----- | 
|                                          |  | December 31, |      
|                                          |  |              |      
|                                          |  | 2007         |       | 2008 |   | 2009  | 
|                                          |  |              |       |      |   |       | 
|Management
 fees - related party          |  | $            | 1,177 |      | $ | 4,420 |  | $ | 4,436 | 
|Professional
 fees (legal and accounting) |  |              | 2,400 |      |   | 2,656 |  |   | 1,585 | 
|Director
 fees                           |  |              |      |      |   | 90    |  |   | 180   | 
|Listing fees
 and expenses                |  |              | 21    |      |   | 419   |  |   | 70    | 
|Investor
 relation expenses               |  |              |      |      |   | 89    |  |   | 196   | 
|Miscellaneous                             |  |              | 56    |      |   | 371   |  |   | 579   | 
|                                          |  |              |       |      |   |       |  |   |       | 
|Total                                     |  | $            | 3,654 |      | $ | 8,045 |  | $ | 7,046 | 
|                                          |  |              |       |      |   |       |  |   |       | 

21. Unearned Revenue / Accrued Revenue

Unearned
Revenue represents cash received in advance of its 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, |       
|                                                                     |  |              |       
|                                                                     |  | 2008         |        | 2009 |  
|                                                                     |  |              |        |      |  
|Unearned Revenue                                                     |  |              |        |      |   |        | 
|Revenue received in advance of service
 provided  Current liability |  | $            | 6,378  |      | $ | 3,973  | 
|Deferred revenue resulting from varying
 charter rates               |  |              |        |      |   |        | 
|Current liability                                                    |  |              | 2,073  |      |   |       | 
|Non-current
     liability                                           |  |              | 11,765 |      |   | 29,450 | 
|                                                                     |  |              |        |      |   |        | 
|Total Unearned Revenue                                               |  | $            | 20,216 |      | $ | 33,423 | 
|                                                                     |  |              |        |      |   |        | 
|                                                                     |  |              |        |      |   |        | 
|Accrued Revenue                                                      |  |              |        |      |   |        | 
|Resulting from varying charter rates 
 Current asset                |  | $            | 3,938  |      | $ | 1,693  | 
|                                                                     |  |              |        |      |   |        | 
|Total Accrued Revenue                                                |  | $            | 3,938  |      | $ | 1,693  | 
|                                                                     |  |              |        |      |   |        | 

F-26

---



22. 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, 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 these sales were 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 these sales were entered into 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.

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

23. Dividends

During 2009,
the Company declared and paid four consecutive quarterly dividends of $0.15 per
share, totaling $32,706.

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

24. Earnings Per Share

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

25. Subsequent Events

(a) Credit
facility:

In February
2010, Maxdodeka Shipping Corporation obtained a reducing revolving credit
facility of $34,500, which was used to refinance part of the purchase price of
the vessel Andreas K (the
Maxdodeka credit facility). The credit facility bears interest at LIBOR plus
a margin and is repayable over six years from drawdown in four semiannual
consecutive installments of $750 each, commencing August 2010, followed by four
semiannual consecutive installments of $900 each, followed by four semiannual
consecutive installments of $1,100 each and a balloon payment of $23,500
payable with the final installment. The ability to drawdown on this credit
facility will be reduced with each semiannual 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 then outstanding loan amount or any part
thereof to the following currencies, using the spot exchange rate applicable on
the date of conversion: USD, JPY, CHF or EUR. This credit facility is secured
by a first mortgage on the vessel Andreas K,
by a corporate guarantee of Safe Bulkers, by corporate guarantees from
Marindou, Avstes, Pelea, Eniaprohi and Eniadefhi, and by other usual maritime
securities.

(b) Interest
rates derivatives:

On January 7,
2010, the Company agreed with the respective bank to novate and amend the
Efragel interest rate agreement to Maxdodeka. The interest rate agreement was
novated on January 8, 2010, for an initial amount of $34,500, which will be
reduced during the term of the swap transaction based on the expected principal
outstanding under the Maxdodeka credit facility. The swap transaction is
effective from February 1, 2010 and expires on February 1, 2013 and bears a
rate of 3.91% p.a.

(c) Dividend
declaration:

On February 9,
2010, the Board of Directors declared a dividend of $0.15 per common share,
totaling $8,176, payable to all shareholders of record as of February 19, 2010.

Management has
evaluated subsequent events through February 23, 2010, the date on
which the financial statements were issued.

F-27

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